EXHIBIT 10.29
SECOND AMENDED AND RESTATED
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SALE AND SERVICING
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AGREEMENT
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AMONG
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CPS WAREHOUSE TRUST, AS
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PURCHASER,
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CONSUMER PORTFOLIO SERVICES, INC. AS
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SELLER AND SERVICER,
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▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
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AS
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BACKUP SERVICER AND TRUSTEE,
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AND
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WESTLB AG,
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AS CONTROLLING PARTY
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DATED AS OF
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APRIL 13, 2005
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.1. DEFINITIONS.......................................................................................1
SECTION 1.2. OTHER DEFINITIONAL PROVISIONS.....................................................................1
SECTION 1.3. CALCULATIONS......................................................................................2
SECTION 1.4. MATERIAL ADVERSE EFFECT...........................................................................2
ARTICLE II CONVEYANCE OF RECEIVABLES..............................................................................2
SECTION 2.1. CONVEYANCE OF RECEIVABLES.........................................................................2
SECTION 2.2. TRANSFERS INTENDED AS SALES.......................................................................5
SECTION 2.3. FURTHER ENCUMBRANCE OF RECEIVABLES AND OTHER CONVEYED PROPERTY....................................5
ARTICLE III THE RECEIVABLES.......................................................................................5
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF SELLER..........................................................5
SECTION 3.2. REPURCHASE UPON BREACH...........................................................................10
SECTION 3.3. CUSTODY OF RECEIVABLES FILES.....................................................................11
SECTION 3.4. ACCEPTANCE OF RECEIVABLE FILES BY TRUSTEE........................................................11
SECTION 3.5. ACCESS TO RECEIVABLE FILES.......................................................................12
SECTION 3.6. TRUSTEE TO OBTAIN FIDELITY INSURANCE.............................................................12
SECTION 3.7. TRUSTEE TO MAINTAIN SECURE FACILITIES............................................................12
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES...........................................................12
SECTION 4.1. DUTIES OF THE SERVICER...........................................................................12
SECTION 4.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF RECEIVABLES; LOCKBOX AGREEMENTS..............13
SECTION 4.3. REALIZATION UPON RECEIVABLES.....................................................................14
SECTION 4.4. INSURANCE........................................................................................15
SECTION 4.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES....................................................15
SECTION 4.6. ADDITIONAL COVENANTS OF SERVICER.................................................................16
SECTION 4.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT..................................................16
SECTION 4.8. SERVICING FEE....................................................................................16
SECTION 4.9. SERVICER'S CERTIFICATE...........................................................................16
SECTION 4.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF SERVICER TERMINATION EVENT.........................17
SECTION 4.11. INDEPENDENT ACCOUNTANTS' REPORTS................................................................17
SECTION 4.12. INDEPENDENT ACCOUNTANTS' REVIEW OF RECEIVABLES FILES............................................18
SECTION 4.13. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING RECEIVABLES...........................18
SECTION 4.14. VERIFICATION OF SERVICER'S CERTIFICATE..........................................................18
SECTION 4.15. RETENTION AND TERMINATION OF SERVICER...........................................................19
SECTION 4.16. FIDELITY BOND...................................................................................20
SECTION 4.17. LIEN SEARCHES; OPINIONS AS TO TRANSFERS AND SECURITY INTERESTS..................................20
SECTION 4.18. SUBSERVICING ARRANGEMENTS.......................................................................20
ARTICLE V ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO THE NOTEHOLDER..................................................21
SECTION 5.1. ESTABLISHMENT OF PLEDGED ACCOUNTS................................................................21
SECTION 5.2. [RESERVED].......................................................................................22
SECTION 5.3. CERTAIN REIMBURSEMENTS TO THE SERVICER...........................................................22
SECTION 5.4. APPLICATION OF COLLECTIONS.......................................................................23
SECTION 5.5. RESERVE ACCOUNT..................................................................................23
SECTION 5.6. ADDITIONAL DEPOSITS..............................................................................23
SECTION 5.7. DISTRIBUTIONS....................................................................................23
SECTION 5.8. NOTE DISTRIBUTION ACCOUNT........................................................................25
SECTION 5.9. STATEMENTS TO THE NOTEHOLDER.....................................................................25
SECTION 5.10. DIVIDEND OF INELIGIBLE RECEIVABLES..............................................................26
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TABLE OF CONTENTS
(CONTINUED)
ARTICLE VI [RESERVED]............................................................................................27
ARTICLE VII THE PURCHASER........................................................................................27
SECTION 7.1. REPRESENTATIONS OF PURCHASER.....................................................................27
ARTICLE VIII THE SELLER..........................................................................................28
SECTION 8.1. REPRESENTATIONS OF SELLER........................................................................28
SECTION 8.2. ADDITIONAL COVENANTS OF THE SELLER...............................................................30
SECTION 8.3. LIABILITY OF SELLER; INDEMNITIES.................................................................30
SECTION 8.4. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, SELLER..........................31
SECTION 8.5. LIMITATION ON LIABILITY OF SELLER AND OTHERS.....................................................32
SECTION 8.6. ADMINISTRATIVE DUTIES............................................................................32
SECTION 8.7. RECORDS..........................................................................................33
SECTION 8.8. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER.............................................33
ARTICLE IX THE SERVICER..........................................................................................33
SECTION 9.1. REPRESENTATIONS OF SERVICER......................................................................33
SECTION 9.2. LIABILITY OF SERVICER; INDEMNITIES...............................................................35
SECTION 9.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF THE SERVICER OR BACKUP SERVICER..36
SECTION 9.4. [RESERVED].......................................................................................37
SECTION 9.5. [RESERVED].......................................................................................37
SECTION 9.6. SERVICER AND BACKUP SERVICER NOT TO RESIGN.......................................................37
SECTION 9.7. REPORTING REQUIREMENTS...........................................................................37
ARTICLE X DEFAULT................................................................................................38
SECTION 10.1. SERVICER TERMINATION EVENTS.....................................................................38
SECTION 10.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT....................................................38
SECTION 10.3. APPOINTMENT OF SUCCESSOR........................................................................39
SECTION 10.4. NOTIFICATION OF TERMINATION AND APPOINTMENT.....................................................40
SECTION 10.5. WAIVER OF PAST DEFAULTS.........................................................................40
SECTION 10.6. ACTION UPON CERTAIN FAILURES OF THE SERVICER....................................................40
SECTION 10.7. CONTINUED ERRORS................................................................................40
ARTICLE XI MISCELLANEOUS PROVISIONS..............................................................................41
SECTION 11.1. AMENDMENT.......................................................................................41
SECTION 11.2. PROTECTION OF TITLE TO PROPERTY.................................................................41
SECTION 11.3. NOTICES.........................................................................................42
SECTION 11.4. ASSIGNMENT......................................................................................43
SECTION 11.5. LIMITATIONS ON RIGHTS OF OTHERS.................................................................43
SECTION 11.6. SEVERABILITY....................................................................................43
SECTION 11.7. SEPARATE COUNTERPARTS...........................................................................43
SECTION 11.8. HEADINGS........................................................................................43
SECTION 11.9. GOVERNING LAW...................................................................................43
SECTION 11.10. ASSIGNMENT TO TRUSTEE..........................................................................44
SECTION 11.11. NONPETITION COVENANTS..........................................................................44
SECTION 11.12. LIMITATION OF LIABILITY OF TRUSTEE.............................................................44
SECTION 11.13. INDEPENDENCE OF THE SERVICER...................................................................44
SECTION 11.14. NO JOINT VENTURE...............................................................................44
SECTION 11.15. INTENTION OF PARTIES REGARDING DELAWARE SECURITIZATION ACT.....................................44
SECTION 11.16. SPECIAL SUPPLEMENTAL AGREEMENT.................................................................45
SECTION 11.17. LIMITED RECOURSE...............................................................................45
SECTION 11.18. ACKNOWLEDGEMENT OF ROLES.......................................................................45
SECTION 11.19. TERMINATION....................................................................................46
SECTION 11.20. SUBMISSION TO JURISDICTION.....................................................................46
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TABLE OF CONTENTS
(CONTINUED)
SCHEDULES
Schedule A - Schedule of Receivables
Schedule B - Location for Delivery of Receivable Files
ANNEXES
Annex A - Defined Terms
SECOND AMENDED AND RESTATED SALE AND SERVICING AGREEMENT (this
"AGREEMENT") dated as of April 13, 2005, among CPS WAREHOUSE TRUST, a Delaware
statutory trust (the "PURCHASER"), CONSUMER PORTFOLIO SERVICES, INC., a
California corporation (in its capacities as Seller, the "SELLER," and as
Servicer, the "SERVICER," respectively), ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
a national banking association, as successor-by-merger to ▇▇▇▇▇ Fargo Bank
Minnesota, National Association, as successor-in-interest to Bank One Trust
Company, N.A. (in its capacities as Backup Servicer, the "BACKUP SERVICER," and
as Trustee, the "TRUSTEE," respectively) and WESTLB AG (f/k/a Westdeutsche
Landesbank Girozentrale) ("WESTLB"), a German banking corporation, as
Controlling Party (in such capacity, the "CONTROLLING PARTY").
WHEREAS, the Purchaser, WestLB, the Servicer, the Seller, Systems &
Services Technologies, Inc., the Backup Servicer and Trustee entered into that
Sale and Servicing Agreement dated as of March 7, 2002 (as amended as of April
18, 2002, July 25, 2002, October 31, 2002, December 10, 2002, March 6, 2003,
July 18, 2003, March 3, 2004 and April 2, 2004, the "ORIGINAL SALE AND SERVICING
AGREEMENT"), pursuant to which the Purchaser purchased, from time to time,
receivables arising in connection with motor vehicle retail installment sale
contracts acquired by Consumer Portfolio Services, Inc., from motor vehicle
dealers and independent finance companies;
WHEREAS, the Purchaser, the Servicer, the Seller, the Backup Servicer,
the Trustee and WestLB amended and restated the Original Sale and Servicing
Agreement as of November 30, 2004 (the "AMENDED AND RESTATED SALE AND SERVICING
AGREEMENT"); and
WHEREAS, the Purchaser, the Servicer, the Seller, the Backup Servicer,
the Trustee and WestLB desire to amend and restate the Amended and Restated Sale
and Servicing Agreement as hereinafter set forth; and
WHEREAS, WestLB, as Noteholder under, and as such term is defined in,
the Amended and Restated Sale and Servicing Agreement, desires to consent to
such amendment and restatement and XL Capital Assurance, Inc., as Controlling
Party under, and as such term is defined in, the Amended and Restated Sale and
Servicing Agreement, has waived its right to consent to the such amendment and
restatement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
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DEFINITIONS
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SECTION 1.1. DEFINITIONS.
Capitalized terms used in this Agreement and not otherwise defined in
this Agreement, shall have the meanings set forth in Annex A attached hereto.
SECTION 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) Accounting terms used but not defined or partly defined in
this Agreement, in any instrument governed hereby or in any certificate
or other document made or delivered pursuant hereto, to the extent not
defined, shall have the respective meanings given to them under U.S.
generally accepted accounting principles as in effect on the date of
this Agreement or any such instrument, certificate or other document,
as applicable. To the extent that the definitions of accounting terms
in this Agreement or in any such instrument, certificate or other
document are inconsistent with the meanings of such terms under U.S.
generally accepted accounting principles, the definitions contained in
this Agreement or in any such instrument, certificate or other document
shall control.
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(c) The words "HEREOF," "HEREIN," "HEREUNDER" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
(d) Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to
this Agreement unless otherwise specified; and the term "INCLUDING"
shall mean "INCLUDING WITHOUT LIMITATION."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as the same may
from time to time be amended, modified or supplemented and includes (in
the case of agreements or instruments) references to all attachments
and instruments associated therewith; all references to a Person
include its permitted successors and assigns.
SECTION 1.3. CALCULATIONS.
Other than as expressly set forth herein or in any of the other Basic
Documents, all calculations of the amount of the Servicing Fee, the Backup
Servicing Fee, the Owner Trustee Fee and the Trustee Fee shall be made on the
basis of a 360-day year consisting of twelve 30-day months. All calculations of
the Unused Facility Fee and the Noteholder's Monthly Interest Distributable
Amount shall be made on the basis of the actual number of days in the Accrual
Period and 360 days in the calendar year. All references to the Principal
Balance of a Receivable as of the last day of an Accrual Period shall refer to
the close of business on such day.
SECTION 1.4. MATERIAL ADVERSE EFFECT.
Whenever a determination is to be made under this Agreement whether a
breach of a representation, warranty or covenant has or could have a material
adverse effect on a Receivable or the interest therein of the Purchaser or the
Noteholder (or any similar or analogous determination), such determination shall
be made by the Controlling Party in its sole discretion.
ARTICLE II
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CONVEYANCE OF RECEIVABLES
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SECTION 2.1. CONVEYANCE OF RECEIVABLES.
(a) In consideration of the Purchaser's delivery to or upon
the order of the Seller on any Funding Date of the Purchase Price
therefor, the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Purchaser, without recourse (subject to the
obligations set forth herein) all right, title and interest of the
Seller, whether now existing or hereafter arising, in, to and under:
(i) the Receivables listed in the Schedule of Receivables from
time to time;
(ii) all monies received under the Receivables on and after
the related Cutoff Date and all Net Liquidation Proceeds received with
respect to the Receivables after the related Cutoff Date;
(iii) the security interests in the Financed Vehicles granted
by Obligors pursuant to the related Contracts and any other interest of
the Seller in such Financed Vehicles, including, without limitation,
the certificates of title or, with respect to such Receivables that
finance a vehicle in the States listed in Annex B, other evidence of
title issued by the applicable Department of Motor Vehicles or similar
authority in such States, with respect to such Financed Vehicles;
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(iv) any proceeds from claims on any Receivables Insurance
Policies or certificates relating to the Financed Vehicles securing the
Receivables or the Obligors thereunder;
(v) all proceeds from recourse against Dealers with respect to
the Receivables;
(vi) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing the Receivables, refunds of
unearned premiums with respect to credit life and credit accident and
health insurance policies or certificates covering an Obligor or
Financed Vehicle under a Receivable or his or her obligations with
respect to a Financed Vehicle and any recourse to Dealers for any of
the foregoing;
(vii) the Receivable File related to each Receivable and all
other documents that the Seller keeps on file in accordance with its
customary procedures relating to the Receivables for Obligors of the
Financed Vehicles;
(viii) all amounts and property from time to time held in or
credited to the Collection Account or the Lockbox Accounts;
(ix) all property (including the right to receive future Net
Liquidation Proceeds) that secures a Receivable that has been acquired
by or on behalf of the Purchaser pursuant to a liquidation of such
Receivable;
(x) each TFC Assignment; and
(xi) all present and future claims, demands, causes and choses
in action in respect of any or all of the foregoing and all payments on
or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of the
conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind
and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing.
(b) The Seller shall transfer to the Purchaser the Receivables
and the other property and rights related thereto described in
PARAGRAPH (a) above only upon the satisfaction of each of the
conditions set forth below on or prior to the related Funding Date. In
addition to constituting conditions precedent to any purchase hereunder
and under each Assignment, the following shall also be conditions
precedent to any Advance on any Funding Date under the terms of the
Indenture:
(i) the Seller shall have provided the Purchaser, the Trustee
and the Controlling Party with an Addition Notice substantially in the
form of EXHIBIT G hereto (which shall include supplements to the
Schedule of Receivables and a Borrowing Base Certificate) not later
than three Business Days prior to such Funding Date and shall have
provided any information reasonably requested by any of the foregoing
with respect to the Related Receivables;
(ii) the Seller shall, to the extent required by SECTION 4.2
of this Agreement, have deposited in the Collection Account all
collections received after the Cutoff Date in respect of the Related
Receivables to be purchased on such Funding Date;
(iii) as of each Funding Date, (A) the Seller shall not be
insolvent and shall not become insolvent as a result of the transfer of
Related Receivables on such Funding Date, (B) the Seller shall not
intend to incur or believe that it shall incur debts that would be
beyond its ability to pay as such debts mature, (C) such transfer shall
not have been made with actual intent to hinder, delay or defraud any
Person and (D) the assets of the Seller shall not constitute
unreasonably small capital to carry out its business as then conducted;
(iv) the Facility Termination Date shall not have occurred;
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(v) the Servicer shall have established one or more Lockbox
Accounts acceptable to the Controlling Party;
(vi) each of the representations and warranties made by the
Seller pursuant to SECTION 3.1 and the other Basic Documents with
respect to the Related Receivables to be purchased on such Funding Date
shall be true and correct as of the related Funding Date and the Seller
shall have performed all obligations to be performed by it hereunder or
in any Assignment on or prior to such Funding Date;
(vii) the Seller shall, at its own expense, on or prior to the
Funding Date, indicate in its computer files that the Related
Receivables to be purchased on such Funding Date have been sold to the
Purchaser pursuant to this Agreement or an Assignment, as applicable;
(viii) the Seller shall have taken any action required to
maintain (i) the first priority perfected ownership interest of the
Purchaser in the Related Receivables and Other Conveyed Property and
(ii) the first priority perfected security interest of the Trustee in
the Collateral;
(ix) no selection procedures adverse to the interests of the
Noteholder shall have been utilized in selecting the Related
Receivables to be sold on such Funding Date;
(x) the addition of any such Related Receivables to be
purchased on such Funding Date shall not result in a material adverse
tax consequence to the Noteholder or the Purchaser;
(xi) as a result of the transfer of the Related Receivables to
be sold on such Funding Date to the Purchaser, the then current rating
of the Note by each Rating Agency will not be withdrawn or downgraded;
PROVIDED, HOWEVER that the Seller shall not be required to obtain
written confirmation from the Rating Agencies that such purchase will
not result in a reduction or withdrawal of the then current Rating of
the Note;
(xii) the Controlling Party, in its reasonable discretion
shall not have disapproved the transfer of the Related Receivables to
be sold on such Funding Date to the Purchaser and the Controlling Party
shall have been reimbursed by the Seller for any fees and expenses
incurred by the Controlling Party in connection with the granting of
such approval;
(xiii) the Seller shall have delivered to the Controlling
Party and the Trustee an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this paragraph
(b);
(xiv) no Funding Termination Event, Servicer Termination
Event, or any event that, with the giving of notice or the passage of
time, would constitute a Funding Termination Event or Servicer
Termination Event, shall have occurred and be continuing;
(xv) the Trustee shall have confirmed receipt of the related
Receivable File for each Related Receivable included in the Borrowing
Base calculation and shall have delivered a copy to the Controlling
Party of a Trust Receipt with respect to the Receivable Files related
to the Related Receivables to be purchased on such Funding Date;
(xvi) the Seller shall have executed and delivered an
Assignment in the form of EXHIBIT F;
(xvii) the Seller shall have filed or caused to be filed all
necessary UCC-l financing statements (or amendments thereto) necessary
to maintain (in each case assuming for purposes of this clause (xvii)
that such perfection may be achieved by making the appropriate
filings), or taken any other steps necessary to maintain, (1) the
first, priority, perfected ownership interest of Purchaser and (2) the
first priority, perfected security interest of the Trustee, with
respect to the Related Receivables and Other Conveyed Property and the
Collateral, respectively to be transferred on such Funding Date; and
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(xviii) on or prior to such Funding Date, the Purchaser will
purchase an interest rate cap with a strike rate equal to the Required
Cap Rate in order to hedge against interest rate fluctuations such that
the aggregate principal amount of all such interest rate caps (together
with the notional amount of other Hedge Agreements) is equal to the
then Invested Amount after taking into account the Advance to occur on
such Funding Date. All costs associated with the entering into such
Hedge Agreements will be paid for by the Purchaser. Each Hedge
Agreement will conform to the standard rating agency rating criteria
for hedge agreements related to securities whose ratings are "swap
dependent." Each Hedge Counterparty shall have a short term debt rating
of at least "A-1" and "P-1" by S&P and ▇▇▇▇▇'▇, respectively.
Unless waived by the Controlling Party in writing, the Seller covenants
that in the event any of the foregoing conditions precedent are not satisfied
with respect to any Related Receivable on the date required as specified above,
the Seller will immediately repurchase such Related Receivable from the
Purchaser, at a price equal to the Purchase Amount thereof, in the manner
specified in SECTION 3.2 and SECTION 4.7. Except with respect to ITEM (xv)
above, the Trustee may rely on the accuracy of the Officers' Certificate
delivered pursuant to ITEM (xiii) above without independent inquiry or
verification.
(c) PAYMENT OF PURCHASE PRICE. In consideration for the sale
of the Related Receivables and Other Conveyed Property described in
SECTION 2.1(a) or the related Assignment, the Purchaser shall, on each
Funding Date on which Related Receivables are transferred hereunder,
pay to or upon the order of the Seller the applicable Purchase Price in
the following manner: (i) cash in an amount equal to the amount of the
Advance received by the Purchaser under the Note on such Funding Date
and (ii) to the extent the Purchase Price for the related Receivables
and Other Conveyed Property exceeds the amount of cash described in
(i), such excess shall be treated as a capital contribution by the
Seller to the Purchaser. On any Funding Date on which funds are on
deposit in the Principal Funding Account, the Purchaser may direct the
Trustee to withdraw therefrom an amount equal to the lesser of (i) the
Purchase Price to be paid to the Seller for Related Receivables and
Other Conveyed Property to be conveyed to the Purchaser and pledged to
the Trustee on such Funding Date (or a portion thereof) and (ii) the
amount on deposit in the Principal Funding Account, and, subject to the
satisfaction of the conditions set forth in SECTION 2.1(b) after giving
effect to such withdrawal, pay such amount to or upon the order of the
Seller in consideration for the sale of the Related Receivables and
Other Conveyed Property on such Funding Date.
SECTION 2.2. TRANSFERS INTENDED AS SALES.
It is the intention of the Seller that each transfer and assignment
contemplated by this Agreement and each Assignment shall constitute a sale of
the Related Receivables and Other Conveyed Property from the Seller to the
Purchaser free and clear of all liens and rights of others and it is intended
that the beneficial interest in and title to the Related Receivables and Other
Conveyed Property shall not be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any bankruptcy
law. In the event that, notwithstanding the intent of the Seller, the transfer
and assignment contemplated hereby or by any Assignment is held not to be a
sale, this Agreement and each Assignment shall constitute a grant of a security
interest in the property referred to in SECTION 2.1 and each Assignment to the
Purchaser which security interest has been assigned to the Trustee, acting on
behalf of the Noteholder.
SECTION 2.3. FURTHER ENCUMBRANCE OF RECEIVABLES AND OTHER CONVEYED
PROPERTY.
(a) Immediately upon the conveyance to the Purchaser by the
Seller of the Related Receivables and any item of the related Other
Conveyed Property pursuant to SECTION 2.1 and the related Assignment,
all right, title and interest of the Seller in and to such Related
Receivables and Other Conveyed Property shall terminate, and all such
right, title and interest shall vest in the Purchaser.
(b) Immediately upon the vesting of any Related Receivables
and the related Other Conveyed Property in the Purchaser, the Purchaser
shall have the sole right to pledge or otherwise encumber such Related
Receivables and the related Other Conveyed Property. Pursuant to the
Indenture, the Purchaser shall grant a security interest in the
Collateral to the Trustee for the benefit of the Noteholder to secure
the repayment of the Note.
ARTICLE III
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THE RECEIVABLES
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SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF SELLER.
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(a) The Seller makes the following representations and warranties as to
the Receivables to the Purchaser and to the Trustee for the benefit of the
Noteholder on which the Purchaser relies in acquiring the Receivables and on
which the Noteholder has relied in purchasing the Note and will rely in paying
the Advance Amount to the Purchaser. Such representations and warranties speak
as of the Closing Date and as of each Funding Date; PROVIDED that to the extent
such representations and warranties relate to the Related Receivables conveyed
on any Funding Date, such representations and warranties shall speak as of the
related Funding Date, but shall survive the sale, transfer and assignment of
such Related Receivables to the Purchaser and the pledge thereof by the
Purchaser to the Trustee pursuant to the Indenture.
(i) CHARACTERISTICS OF RECEIVABLES. Each Receivable (1) has
been originated in the United States of America by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such
Dealer's business, such Dealer had all necessary licenses and permits
to originate such Receivables in the state where such Dealer was
located, has been fully and properly executed by the parties thereto,
has been purchased by the Seller or TFC in connection with the sale of
Financed Vehicles by the Dealers and has been validly assigned by such
Dealer to the Seller or TFC (and in the case of the TFC Receivables,
from TFC to the Seller) in accordance with its terms, (2) has created a
valid, subsisting, and enforceable first priority perfected security
interest in favor of the Seller or TFC in the Financed Vehicle, which
security interest has been validly assigned by the Seller or TFC to the
Purchaser and by the Purchaser to the Trustee, (3) contains customary
and enforceable provisions such that the rights and remedies of the
holder or assignee thereof shall be adequate for realization against
the collateral of the benefits of the security including without
limitation a right of repossession following a default, (4) provides
for level monthly payments that fully amortize the Amount Financed over
the original term (except for the last payment, which may be different
from the level payment but in no event shall exceed three times such
level payment) and yields interest at the Annual Percentage Rate, (5)
if such Receivable is a Rule of 78's Receivable, provides for, in the
event that such contract is prepaid, a prepayment that fully pays the
Principal Balance and includes a full month's interest, in the month of
prepayment, at the Annual Percentage Rate, (6) is a Rule of 78's
Receivable or a Simple Interest Receivable, (7) was originated by a
Dealer to an Obligor and was sold by the Dealer to the Seller or TFC
without any fraud or misrepresentation on the part of such Dealer or
the Obligor and (8) is denominated in U.S. dollars.
(ii) ADDITIONAL RECEIVABLES CHARACTERISTICS. As of the related
Funding Date, as applicable:
(A) each Related Receivable that is a CPS Receivable
has (1) an original term of 24 to 72 months; (2) an original
Amount Financed of at least $3,000 and not more than $35,000;
and (3) had an APR of at least 8% and not more than 30%
(subject to applicable laws);
(B) each Related Receivable that is a TFC Receivable
has (1) an original term of 9 to 60 months; (2) an original
Amount Financed of at least $1,000 and not more than $25,000;
and (3) had an APR of at least 9.90% and not more than 30%
(subject to applicable laws).
(C) each Related Receivable is not more than 30 days
past due with respect to more than 10% of any Scheduled
Receivable Payment as of the related Cutoff Date and is not
due from a Delinquent Obligor;
(D) no Related Receivable has been extended beyond
its original term, except in accordance with the applicable
Contract Purchase Guidelines regarding deferments or
extensions;
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(E) each Related Receivable satisfies in all material
respects the applicable Contract Purchase Guidelines as in
effect on the Closing Date or as otherwise amended from time
to time; provided, that such amendments do not have a material
adverse effect on the Noteholder;
(F) the Seller's credit rating with respect to each
related Obligor for a Related Receivable that is a CPS
Receivable shall be no greater than 52; and
(G) no Financed Vehicle financed under the Related
Receivables is on TFC's or the Seller's vehicle exclusion
list, as may be amended from time to time.
(iii) SCHEDULE OF RECEIVABLES. The information with respect to
the Related Receivables set forth in Schedule A to the related
Assignment is true and correct in all material respects as of the close
of business on the related Cutoff Date, and no selection procedures
adverse to the Noteholder have been utilized in selecting the Related
Receivables to be sold hereunder.
(iv) COMPLIANCE WITH LAW. Each Related Receivable, the sale of
the Financed Vehicle and the sale of any physical damage, credit life
and credit accident and health insurance and any extended warranties or
service contracts complied at the time the Related Receivable was
originated or made and at the execution of the applicable Assignment
complies in all material respects with all requirements of applicable
federal, State, and local laws, and regulations thereunder including,
without limitation, usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair
Debt Collection Practices Act, the Federal Trade Commission Act, the
▇▇▇▇▇▇▇▇-▇▇▇▇ Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Servicemembers Relief Act, the Texas Consumer Credit Code,
the California Automobile Sales Finance Act and State adaptations of
the National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and disclosure
laws.
(v) NO GOVERNMENT OBLIGOR. None of the Related Receivables are
due from the United States of America or any State or from any agency,
department, or instrumentality of the United States of America or any
State.
(vi) SECURITY INTEREST IN FINANCED VEHICLE. Immediately
subsequent to the sale, assignment and transfer thereof to the
Purchaser, each Related Receivable shall be secured by a validly
perfected first priority security interest in the Financed Vehicle in
favor of the Seller or TFC as secured party which has been validly
assigned to the Purchaser, and such assigned security interest is prior
to all other liens upon and security interests in such Financed Vehicle
which now exist or may hereafter arise or be created (except, as to
priority, for any tax liens or mechanics' liens which may arise after
the related Funding Date as a result of an Obligor's failure to pay its
obligations, as applicable).
(vii) RECEIVABLES IN FORCE. No Related Receivable has been
satisfied, subordinated or rescinded, nor has any related Financed
Vehicle been released from the lien granted by the related Receivable
in whole or in part.
(viii) NO WAIVER. Except as permitted under SECTION 4.2 and
CLAUSE (IX) below, no provision of a Related Receivable has been
waived, altered or modified in any respect since its origination.
(ix) NO AMENDMENTS. Except as permitted under SECTION 4.2, no
Related Receivable has been amended.
(x) NO DEFENSES. No right of rescission, setoff, counterclaim
or defense exists or has been asserted or threatened with respect to
any Related Receivable. The operation of the terms of any Related
Receivable or the exercise of any right thereunder will not render such
Related Receivable unenforceable in whole or in part and such
Receivable is not subject to any such right of rescission, setoff,
counterclaim, or defense.
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(xi) NO LIENS. As of the related Cutoff Date, (a) there are no
liens or claims existing or which have been filed for work, labor,
storage or materials relating to a Financed Vehicle financed under a
Related Receivable that shall be liens prior to, or equal or coordinate
with, the security interest in the Financed Vehicle granted by the
Related Receivable and (b) there is no lien against the Financed
Vehicle financed under a Related Receivable for delinquent taxes.
(xii) NO DEFAULT; REPOSSESSION. Except for payment
delinquencies continuing for a period of not more than 30 days as of
the related Cutoff Date, no default, breach, violation or event
permitting acceleration under the terms of any Related Receivable has
occurred; and no continuing condition that with notice or the lapse of
time would constitute a default, breach, violation or event permitting
acceleration under the terms of any Related Receivable has arisen; and
neither the Seller nor TFC shall waive or has waived any of the
foregoing (except in a manner consistent with SECTION 4.2) and no
Financed Vehicle financed under a Related Receivable shall have been
repossessed.
(xiii) INSURANCE; OTHER. (A) Each Obligor under the Related
Receivables has obtained an insurance policy covering the Financed
Vehicle as of the execution of such Receivable insuring against loss
and damage due to fire, theft, transportation, collision and other
risks generally covered by comprehensive and collision coverage, and
either the Seller or TFC, as applicable, and its successors and assigns
are named the loss payee or an additional insured of such insurance
policy, and each Related Receivable requires the Obligor to obtain and
maintain such insurance naming the Seller or TFC, as applicable, and
its successors and assigns as loss payee or an additional insured, (B)
each Related Receivable that finances the cost of premiums for credit
life and credit accident and health insurance is covered by an
insurance policy or certificate of insurance naming the Seller or TFC,
as applicable, as policyholder (creditor) under each such insurance
policy and certificate of insurance and (C) as to each Related
Receivable that finances the cost of an extended service contract, the
respective Financed Vehicle which secures the Related Receivable is
covered by an extended service contract.
(xiv) TITLE. It is the intention of the Seller that each
transfer and assignment herein contemplated constitutes a sale of the
Related Receivables and the related Other Conveyed Property from the
Seller to the Purchaser and that the beneficial interest in and title
to such Related Receivables and related Other Conveyed Property not be
part of the Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. No Related
Receivable or related Other Conveyed Property has been sold,
transferred, assigned, or pledged by the Seller to any Person other
than the Purchaser and by the Purchaser to any Person other than the
Trustee. Immediately prior to each transfer and assignment herein
contemplated, the Seller had good and marketable title to each Related
Receivable and related Other Conveyed Property and was the sole owner
thereof, free and clear of all liens, claims, encumbrances, security
interests, and rights of others, and, immediately upon the transfer
thereof to the Purchaser and the concurrent pledge to the Trustee under
the Indenture, the Trustee for the benefit of the Noteholder shall have
a valid and enforceable security interest in the Collateral, free and
clear of all liens, encumbrances, security interests, and rights of
others, and such transfer has been perfected under the UCC.
(xv) LAWFUL ASSIGNMENT. No Related Receivable has been
originated in, or is subject to the laws of, any jurisdiction under
which the sale, transfer, and assignment of such Related Receivable
under this Agreement or pursuant to transfers of the Note shall be
unlawful, void, or voidable. Neither the Seller nor TFC has entered
into any agreement with any account debtor that prohibits, restricts or
conditions the assignment of any portion of the Related Receivables.
(xvi) ALL FILINGS MADE. All filings (including, without
limitation, UCC filings or other actions) necessary in any jurisdiction
to give: (a) the Purchaser a first priority perfected ownership
interest in the Receivables and the Other Conveyed Property and (b) the
Trustee, for the benefit of the Noteholder, a first priority perfected
security interest in the Collateral have been made, taken or performed.
(xvii) RECEIVABLE FILE; ONE ORIGINAL. The Seller has delivered
to the Trustee, at the location specified in SCHEDULE B hereto, a
complete Receivable File with respect to each Related Receivable, and
the Trustee has delivered to the Purchaser and the Controlling Party a
copy of the Trust Receipt therefor. There is only one original executed
copy of each Receivable.
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(xviii) CHATTEL PAPER. Each Related Receivable constitutes
"TANGIBLE CHATTEL PAPER" under the UCC.
(xix) TITLE DOCUMENTS. (A) If the Related Receivable was
originated in a State in which notation of a security interest on the
title document of the related Financed Vehicle is required or permitted
to perfect such security interest, the title document of the related
Financed Vehicle for such Related Receivable shows, or if a new or
replacement title document is being applied for with respect to such
Financed Vehicle the title document (or, with respect to Related
Receivables that finance a vehicle in the States listed in Annex B,
other evidence of title issued by the applicable Department of Motor
Vehicles or similar authority in such States) will be received within
180 days and will show, the Seller (or in the case of a TFC Receivable,
TFC) named as the original secured party under the Related Receivable
as the holder of a first priority security interest in such Financed
Vehicle, and (B) if the Related Receivable was originated in a State in
which the filing of a financing statement under the UCC is required to
perfect a security interest in motor vehicles, such filings or
recordings have been duly made and show the Seller (or in the case of a
TFC Receivable, TFC) named as the original secured party under the
Related Receivable, and in either case, the Trustee has the same rights
as such secured party has or would have (if such secured party were
still the owner of the Receivable) against all parties claiming an
interest in such Financed Vehicle. With respect to each Related
Receivable for which the title document has not yet been returned from
the Registrar of Titles, the Seller has received written evidence from
the related Dealer that such title document showing the Seller (or in
the case of a TFC Receivable, TFC) as first lienholder has been applied
for.
(xx) VALID AND BINDING OBLIGATION OF OBLIGOR. Each Related
Receivable is the legal, valid and binding obligation in writing of the
Obligor thereunder and is enforceable in accordance with its terms,
except only as such enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally, and all parties to such contract had full legal
capacity to execute and deliver such contract and all other documents
related thereto and to grant the security interest purported to be
granted thereby. Each Related Receivable is not subject to any right of
set-off by the Obligor.
(xxi) CHARACTERISTICS OF OBLIGORS. As of the date of each
Obligor's application for the loan from which each Related Receivable
that is a CPS Receivable arises, such Obligor (a) did not have any
material past due credit obligations or any personal or real property
repossessed or wages garnished within one year prior to the date of
such application, unless such amounts have been repaid or discharged
through bankruptcy, (b) was not the subject of any federal, State or
other bankruptcy, insolvency or similar proceeding pending on the date
of application that has not been discharged, (c) had not been the
subject of more than one Federal, State or other bankruptcy, insolvency
or similar proceeding, (d) was domiciled in the United States and (e)
was not self-employed.
(xxii) POST-OFFICE BOX. On or prior to the next billing period
after the related Cutoff Date, the Servicer will notify each Obligor to
make payments with respect to its respective Related Receivables after
the related Cutoff Date directly to the Post-Office Box, and will
provide each Obligor with a monthly statement in order to enable such
Obligor to make payments directly to the Post-Office Box.
(xxiii) CASUALTY. No Financed Vehicle financed under a Related
Receivable has suffered a Casualty.
(xxiv) NO AGREEMENT TO LEND. The Obligor with respect to each
Related Receivable does not have any option under the Receivable to
borrow from any person any funds secured by the Financed Vehicle.
(xxv) OBLIGATION TO DEALERS OR OTHERS. The Purchaser and its
assignees will assume no obligation to Dealers or other originators or
holders of the Related Receivables (including, but not limited to under
dealer reserves) as a result of its purchase of the Related
Receivables.
(xxvi) NO IMPAIRMENT. Neither Seller nor the Purchaser has
done anything to convey any right to any Person that would result in
such Person having a right to payments due under any Related
Receivables or otherwise to impair the rights of the Purchaser, the
Trustee or the Noteholder in any Related Receivable or the proceeds
thereof.
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(xxvii) RECEIVABLES NOT ASSUMABLE. No Related Receivable is
assumable by another Person in a manner which would release the Obligor
thereof from such Obligor's obligations to the Purchaser or Seller with
respect to such Related Receivable.
(xxviii) SERVICING. The servicing of each Related Receivable
and the collection practices relating thereto have been lawful and in
accordance with the standards set forth in this Agreement; and other
than Seller, TFC and the Back-up Servicer pursuant to the Basic
Documents, no other person has the right to service the Receivable.
(xxix) CREATION OF SECURITY INTEREST. This Agreement creates a
valid and continuing security interest (as defined in the UCC) in the
Receivables and the Other Conveyed Property in favor of the Purchaser,
which security interest is prior to all other Liens and is enforceable
as such as against creditors of and purchasers from the Seller.
(xxx) PERFECTION OF SECURITY INTEREST IN THE RECEIVABLES. The
Seller has caused the filing of all appropriate financing statements in
the proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the security interest in the
Receivables and the Other Conveyed Property granted to the Purchaser
hereunder pursuant to SECTION 2.1 and the related Assignment.
(xxxi) NO OTHER SECURITY INTERESTS. Other than the security
interest granted to the Purchaser pursuant to SECTION 2.1 and the
related Assignment, the Seller has not pledged, assigned, sold, granted
a security interest in, or otherwise conveyed any of the Receivables or
the Other Conveyed Property, other than such security interests as are
released at or before the conveyance thereof. The Seller has not
authorized the filing of and is not aware of any financing statements
filed against the Seller that include a description of collateral
covering any portion of the Receivables and the Other Conveyed Property
other than any financing statement relating to the security interest
granted to the Purchaser hereunder or that has been terminated or
released as to the Receivables and the Other Conveyed Property. The
Seller is not aware of any judgment or tax lien filings against the
Seller.
(xxxii) NOTATIONS ON CONTRACTS; FINANCING STATEMENT
DISCLOSURE. The Servicer has in its possession copies of all Contracts
that constitute or evidence the Receivables. The Contracts that
constitute or evidence the Receivables do not have any marks or
notations indicating that they have been pledged, assigned or otherwise
conveyed to any Person other than the Purchaser and/or the Trustee for
the benefit of the Noteholder. All financing statements filed or to be
filed against the Seller in favor of the Purchaser in connection
herewith describing the Receivables and the Other Conveyed Property
contain a statement to the following effect: "A purchase of or security
interest in any collateral described in this financing statement will
violate the rights of the secured party."
(xxxiii) STATE CONCENTRATION OPINIONS. If Eligible Receivables
originated in any one state exceed 10% of the Aggregate Principal
Balance of the Eligible Receivables, the Seller shall deliver to each
Rating Agency and the Controlling Party an Opinion of Counsel with
respect to the security interest in the Financed Vehicles with respect
to such state on or prior to the related Funding Date.
(xxxiv) ADDITIONAL CHARACTERISTICS OF THE TFC RECEIVABLES.
Each Obligor under a TFC Receivable (A) was signed up for allotment at
the time of origination of such TFC Receivable and (B) is currently
enlisted in a branch of the U.S. military.
SECTION 3.2. REPURCHASE UPON BREACH.
The Seller, the Servicer, the Controlling Party or the Trustee, as the
case may be, shall inform the other parties to this Agreement promptly, in
writing, upon the discovery of any breach of the Seller's representations and
warranties made pursuant to SECTION 3.1 (without regard to any limitations
therein as to the Seller's knowledge). Unless the breach shall have been cured
by the last day of the next Accrual Period following the discovery thereof by
the Trustee or the Controlling Party or receipt by the Trustee or the
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Controlling Party of notice from the Seller or the Servicer of such breach, the
Seller shall repurchase any Receivable if the value of such Receivable is
materially and adversely affected by the breach as of the last day of such next
Accrual Period (or, at the Seller's option, the last day of the Accrual Period
in which such discovery was made). In consideration of the purchase of any
Receivable, the Seller shall remit the Purchase Amount, in the manner specified
in SECTION 5.6. The sole remedy of the Purchaser, the Trustee, the Noteholder or
the Controlling Party with respect to a breach of representations and warranties
pursuant to SECTION 3.1 shall be to enforce the Seller's obligation to purchase
such Receivables; PROVIDED, HOWEVER, that the Seller shall indemnify the
Trustee, the Backup Servicer, the Purchaser, the Controlling Party and the
Noteholder against all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel, which may be asserted against
or incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach. Upon receipt of the Purchase Amount
in respect of any Defective Receivables and written instructions from the
Servicer, the Trustee shall release to the Seller or its designee the related
Receivables File and shall execute and deliver all reasonable instruments of
transfer or assignment, without recourse, as are prepared by the Seller and
delivered to the Trustee and necessary to vest in the Seller or such designee
title to such Defective Receivables.
SECTION 3.3. CUSTODY OF RECEIVABLES FILES.
(a) In connection with each sale, transfer and assignment of
Receivables and related Other Conveyed Property to the Purchaser
pursuant to this Agreement and each Assignment, and each pledge thereof
by the Purchaser to the Trustee pursuant to the Indenture, the Trustee
shall act as custodian of the following documents or instruments in its
possession which shall be delivered to the Trustee on or before the
Closing Date or the related Funding Date in accordance with SECTION 3.4
(with respect to each Receivable):
(i) The fully executed original of the Receivable (together
with any agreements modifying or assigning the Receivable, including
without limitation any extension agreements); and
(ii) The original certificate of title in the name of the
Obligor with a notation on such certificate of title evidencing
Seller's or TFC's security interest therein, or such documents that the
Seller shall keep on file, in accordance with its customary procedures,
evidencing the security interest of the Seller or TFC, respectively, in
the Financed Vehicle or, if not yet received, a copy of the application
therefor showing the Seller or TFC, as applicable, as secured party, or
a dealer guarantee of title.
(b) Upon payment in full of any Receivable, the Servicer will
notify the Trustee pursuant to a certificate of a Servicing Officer in
the form of EXHIBIT C and shall request delivery of the Receivable and
Receivable File to the Servicer.
SECTION 3.4. ACCEPTANCE OF RECEIVABLE FILES BY TRUSTEE.
In connection with any Funding Date, the Seller shall cause to be
delivered to the Trustee the Receivable Files for the Related Receivables to be
purchased not less than four Business Days prior to the related Funding Date.
The Trustee shall within two Business Days after receipt of such files, execute
and deliver to the Controlling Party, a receipt substantially in the form of
EXHIBIT B hereto (a "TRUST RECEIPT") for the Receivable Files received by the
Trustee. By its delivery of a Trust Receipt, the Trustee shall be deemed to have
(a) acknowledged receipt of the files which the Seller has represented are and
contain the Receivable Files for the Related Receivables purchased by the
Purchaser on the related Funding Date, (b) reviewed such files and (c)
determined that it has received a file for each Related Receivable identified in
Schedule A to the related Assignment. The Trustee declares that it will hold and
will continue to hold such files and any amendments, replacements or supplements
thereto and all Other Conveyed Property as Trustee, custodian, agent and bailee
in trust for the use and benefit of the Noteholder. The Trustee agrees to review
each file delivered to it no later than (x) 20 days if less than 7,500 files and
(y) 30 days if greater than 7,500 files after the related Funding Date to
determine whether such Receivable Files contain the documents referred to in
Section 3.3(a)(i) and (ii). If in its examination of the files delivered to it
by the Seller pursuant to this SECTION 3.4, the Trustee finds that a file for a
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Receivable has not been received, or that a file is unrelated to the Receivables
identified in Schedule A to the related Assignment or that any of the documents
referred to in SECTION 3.3(a)(i) or (ii) are not contained in a Receivable File,
the Trustee shall inform the Purchaser, the Seller and the Controlling Party
pursuant to an exception report attached to the Trust Receipt as SCHEDULE I of
the failure to receive a file with respect to such Receivable (or the failure of
any of the aforementioned documents to be included in the Receivable File) or
shall return to the Purchaser, as the Seller's designee any file unrelated to a
Receivable identified in Schedule A to the related Assignment (it being
understood that the Trustee's obligation to review the contents of any
Receivable File shall be limited as set forth in the preceding sentence). Unless
such defect with respect to such Receivable File shall have been cured by the
last day of the next Accrual Period following discovery thereof by the Trustee,
the Controlling Party shall cause the Seller to repurchase any such Receivable
as of such last day. In consideration of the purchase of the Receivable, the
Seller shall remit the Purchase Amount for such Receivable, in the manner
specified in SECTION 5.6. The sole remedy of the Trustee, the Purchaser, the
Noteholder and the Controlling Party with respect to a breach pursuant to this
SECTION 3.4 shall be to require the Seller to purchase the applicable
Receivables pursuant to this SECTION 3.4; PROVIDED, HOWEVER, that the Seller
shall indemnify the Trustee, the Backup Servicer, the Purchaser, the Controlling
Party and the Noteholder against all costs, expenses, losses, damages, claims
and liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach. Upon receipt of
the Purchase Amount for a Receivable and written instructions from the Servicer,
the Trustee shall release to the Seller or its designee the related Receivable
File and shall execute and deliver all reasonable instruments of transfer or
assignment, without recourse, as are prepared by the Seller and delivered to the
Trustee and are necessary to vest in the Seller or such designee title to the
Receivable. The Trustee shall make a list of Receivables for which an
application for a certificate of title but not an original certificate of title
or, with respect to Receivables that finance a vehicle in the States listed in
Annex B, other evidence of title issued by the applicable Department of Motor
Vehicles or similar authority in such States, is included in the Receivable File
as of the date of its review of the Receivable Files and deliver a copy of such
list to the Servicer and the Controlling Party. On the date which is 180 days
following the related Funding Date, and monthly thereafter, the Trustee shall
inform the Seller and the other parties to this Agreement of any Receivable for
which the related Receivable File on such date does not include an original
certificate of title or, with respect to Financed Vehicles in the States listed
in Annex B, other evidence of title issued by the applicable Department of Motor
Vehicles or similar authority in such States, and the Seller shall repurchase
any such Receivable as of the last Business Day of the Accrual Period in which
the expiration of such 180 days occurs. In consideration of the purchase of the
Receivable, the Seller shall remit the Purchase Amount for such Receivable, in
the manner specified in SECTION 5.6.
SECTION 3.5. ACCESS TO RECEIVABLE FILES.
The Trustee shall permit the Servicer and Controlling Party and their
designees access to the Receivable Files at all reasonable times during the
Trustee's normal business hours. The Trustee shall, within two Business Days of
the request of the Servicer or the Controlling Party, execute such documents and
instruments as are prepared by the Servicer or the Controlling Party and
delivered to the Trustee, as the Servicer or the Controlling Party deems
necessary to permit the Servicer, in accordance with its customary servicing
procedures, to enforce the Receivable on behalf of the Purchaser and any related
insurance policies covering the Obligor, the Receivable or Financed Vehicle so
long as such execution in the Trustee's sole discretion does not conflict with
this Agreement or the Indenture and will not cause it undue risk or liability.
The Trustee shall not be obligated to release any document from any Receivable
File unless it receives a release request signed by a Servicing Officer in the
form of EXHIBIT C hereto (the "RELEASE REQUEST"). Such Release Request shall
obligate the Servicer to return such document(s) to the Trustee when the need
therefor no longer exists unless the Receivable shall be liquidated, in which
case, the Servicer shall certify in the Release Request that all amounts
required to be deposited in the Collection Account with respect to such
Receivable have been so deposited.
SECTION 3.6. TRUSTEE TO OBTAIN FIDELITY INSURANCE.
The Trustee shall maintain a fidelity bond in the form and amount as is
customary for entities acting as a trustee of funds and documents in respect of
consumer contracts on behalf of institutional investors.
SECTION 3.7. TRUSTEE TO MAINTAIN SECURE FACILITIES.
The Trustee shall maintain or cause to be maintained continuous custody
of the Receivables Files in secure and fire resistant facilities in accordance
with customary standards for such custody.
ARTICLE IV
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ADMINISTRATION AND SERVICING OF RECEIVABLES
-------------------------------------------
SECTION 4.1. DUTIES OF THE SERVICER.
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The Servicer, as agent for the Purchaser and the Controlling Party
shall manage, service, administer and make collections on the Receivables with
reasonable care, using that degree of skill and attention customary and usual
for institutions which service motor vehicle retail installment sale contracts
similar to the Receivables and, to the extent more exacting, that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others. In performing such duties, the Servicer shall comply with
its current servicing policies and procedures, as such servicing policies and
procedures may be amended from time to time, so long as such amendments will not
materially and adversely affect the interests of the Noteholder, and notice of
such amendments is given to the Controlling Party prior to the effectiveness
thereof. The Servicer's duties shall include collection and posting of all
payments, responding to inquiries of Obligors on such Receivables, investigating
delinquencies, sending payment statements to Obligors, reporting tax information
to Obligors, accounting for collections, furnishing monthly and annual
statements to the Trustee and the Controlling Party with respect to
distributions. Without limiting the generality of the foregoing, and subject to
the servicing standards set forth in this Agreement including, without
limitation, the restrictions set forth in SECTION 4.6, the Servicer is
authorized and empowered by the Purchaser to execute and deliver, on behalf of
itself, the Purchaser or the Noteholder, any and all instruments of satisfaction
or cancellation, or partial or full release or discharge, and all other
comparable instruments, with respect to such Receivables or to the Financed
Vehicles securing such Receivables and/or the certificates of title or, with
respect to Financed Vehicles in the States listed in Annex B, other evidence of
title issued by the applicable Department of Motor Vehicles or similar authority
in such States with respect to such Financed Vehicles. If the Servicer shall
commence a legal proceeding to enforce a Receivable, the Purchaser shall
thereupon be deemed to have automatically assigned, solely for the purpose of
collection, such Receivable to the Servicer. If in any enforcement suit or legal
proceeding it shall be held that the Servicer may not enforce a Receivable on
the ground that it shall not be a real party in interest or a holder entitled to
enforce such Receivable, the Purchaser shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Noteholder. The Servicer shall prepare and furnish, and
the Trustee shall execute, any powers of attorney and other documents reasonably
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
SECTION 4.2. COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATIONS OF
RECEIVABLES; LOCKBOX AGREEMENTS.
(a) Consistent with the standards, policies and procedures
required by this Agreement, the Servicer shall make reasonable efforts
to collect all payments called for under the terms and provisions of
the Receivables as and when the same shall become due and shall follow
such collection procedures as it follows with respect to all comparable
automotive receivables that it services for itself or others; PROVIDED,
HOWEVER, that promptly after the Closing Date (or the related Funding
Date, as applicable) the Servicer shall notify each Obligor to make all
payments with respect to the Receivables to the applicable Post-Office
Box. The Servicer will provide each Obligor with a monthly statement in
order to notify such Obligors to make payments directly to the
applicable Post-Office Box. The Servicer shall allocate collections
between principal and interest in accordance with the customary
servicing procedures it follows with respect to all comparable
automotive receivables that it services for itself or others and in
accordance with the terms of this Agreement. Except as provided below,
the Servicer, for as long as the Seller is the Servicer, may in
accordance with the applicable Contract Purchase Guidelines grant
extensions on a Receivable; PROVIDED, HOWEVER, that the Servicer may
not, without the prior written consent of the Controlling Party, grant
(x) more than one (1) extension per calendar year with respect to a CPS
Receivable or grant an extension with respect to a CPS Receivable for
more than one (1) calendar month or grant more than four (4) extensions
in the aggregate with respect to a CPS Receivable and (y) more than two
(2) extensions per calendar year with respect to a TFC Receivable or
grant an extension with respect to a TFC Receivable for more than one
(1) calendar month or grant more than four (4) extensions in the
aggregate with respect to a TFC Receivable. In no event shall the
principal balance of a Receivable be reduced, except in connection with
a settlement in the event the Receivable becomes a Defaulted
Receivable. If the Servicer is not the Seller or the Backup Servicer,
the Servicer may not make any extension on a Receivable without the
prior written consent of the Controlling Party. The Servicer may in its
discretion waive any prepayment charge, late payment charge or any
other similar fees that may be collected in the ordinary course of
servicing a Receivable. Notwithstanding anything to the contrary
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contained herein, the Servicer shall not agree to any alteration of the
interest rate on any Receivable or of the amount of any Scheduled
Receivable Payment on Receivables, other than to the extent that such
alteration is required by applicable law.
(b) The Servicer shall establish one or more Lockbox Accounts
in the name of the Purchaser for the benefit of the Trustee, acting on
behalf of the Noteholder. Pursuant to each Lockbox Agreement, the
Trustee has authorized the Servicer to direct dispositions of funds on
deposit in the related Lockbox Account to the Collection Account (but
not to any other account), and no other Person, except the Lockbox
Processor and the Trustee, has authority to direct disposition of funds
on deposit in such Lockbox Account. However, each Lockbox Agreement
shall provide that the Lockbox Bank will comply with instructions
originated by the Trustee relating to the disposition of the funds in
the related Lockbox Account without further consent by the Seller, the
Servicer or the Purchaser. The Trustee shall have no liability or
responsibility with respect to the Lockbox Processor's directions or
activities as set forth in the preceding sentence. Each Lockbox Account
shall be established pursuant to and maintained in accordance with the
related Lockbox Agreement and shall be a demand deposit account
initially established and maintained with Bank One, N.A., or at the
request of the Controlling Party an Eligible Account satisfying clause
(i) of the definition thereof; PROVIDED, HOWEVER, that the Trustee
shall give the Servicer prior written notice of any change made at the
request of the Controlling Party in the location of a Lockbox Account.
The Trustee shall establish and maintain each Post-Office Box at a
United States Post Office Branch in the name of the Purchaser for the
benefit of the Noteholder.
(c) Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to a Lockbox Agreement, the
Servicer shall remain obligated and liable to the Purchaser, the
Trustee, the Controlling Party and the Noteholder for servicing and
administering the Receivables and the Other Conveyed Property in
accordance with the provisions of this Agreement without diminution of
such obligation or liability by virtue thereof.
(d) In the event the Seller shall for any reason no longer be
acting as the Servicer hereunder, the Backup Servicer or a successor
Servicer shall thereupon assume all of the rights and obligations of
the outgoing Servicer under the Lockbox Agreements in accordance with
the Servicing and Lockbox Processing Assumption Agreements. In such
event, the Backup Servicer or a successor Servicer shall be deemed to
have assumed all of the outgoing Servicer's interest therein and to
have replaced the outgoing Servicer as a party to the Lockbox
Agreements to the same extent as if such Lockbox Agreements had been
assigned to the Backup Servicer or a successor Servicer, except that
the outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the Lockbox Bank
under such Lockbox Agreements. The outgoing Servicer shall, upon
request of the Trustee, but at the expense of the outgoing Servicer,
deliver to the Backup Servicer or a successor Servicer all documents
and records relating to the Lockbox Agreements and an accounting of
amounts collected and held by the Lockbox Bank and otherwise use its
best efforts to effect the orderly and efficient assignment of any
Lockbox Agreement to the Backup Servicer or a successor Servicer. In
the event that the Controlling Party shall elect to change the identity
of the Lockbox Bank, the Servicer, at its expense, shall cause the
Lockbox Bank to deliver, at the direction of the Controlling Party, to
the Trustee or a successor Lockbox Bank, all documents and records
relating to the Receivables and all amounts held (or thereafter
received) by the Lockbox Bank (together with an accounting of such
amounts) and shall otherwise use its best efforts to effect the orderly
and efficient transfer of the Lockbox arrangements.
(e) On each Business Day, pursuant to each Lockbox Agreement,
the Lockbox Processor will transfer any payments from Obligors received
in the applicable Post-Office Box to the related Lockbox Account. The
Servicer shall cause the Lockbox Bank to transfer cleared funds from
the Lockbox Accounts to the Collection Account. In addition, the
Servicer shall remit all payments by or on behalf of the Obligors
received by the Servicer with respect to the Receivables (other than
Purchased Receivables) and all Net Liquidation Proceeds no later than
two Business Days following receipt directly (without deposit into any
intervening account) into the Lockbox Account or the Collection
Account. The Servicer shall not commingle its assets and funds with
those on deposit in the Lockbox Accounts.
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SECTION 4.3. REALIZATION UPON RECEIVABLES.
On behalf of the Purchaser and the Noteholder, the Servicer shall use
its best efforts, consistent with the servicing procedures set forth herein, to
repossess or otherwise convert the ownership of the Financed Vehicle securing
any Receivable as to which the Servicer shall have determined eventual payment
in full is unlikely. The Servicer shall commence efforts to repossess or
otherwise convert the ownership of a Financed Vehicle on or prior to the date
that an Obligor has failed to make more than 90% of a Scheduled Receivable
Payment thereon in excess of $10 for 120 days or more; PROVIDED, HOWEVER, that
the Servicer may elect not to commence such efforts within such time period if
in its good faith judgment it determines either that it would be impracticable
to do so or that the proceeds ultimately recoverable with respect to such
Receivable would be increased by forbearance. The Servicer shall follow such
customary and usual practices and procedures as it shall deem necessary or
advisable in its servicing of automotive receivables, consistent with the
standards of care set forth in Section 4.2, which may include reasonable efforts
to realize upon any recourse to Dealers and selling the Financed Vehicle at
public or private sale. The foregoing shall be subject to the provision that, in
any case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with the repair or the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession will increase the proceeds ultimately recoverable with
respect to such Receivable by an amount greater than the amount of such
expenses.
SECTION 4.4. INSURANCE.
(a) The Servicer, in accordance with the servicing procedures
and standards set forth herein, shall require that (i) each Obligor
shall have obtained insurance covering the Financed Vehicle, as of the
date of the execution of the Receivable, insuring against loss and
damage due to fire, theft, transportation, collision and other risks
generally covered by comprehensive and collision coverage and each
Receivable requires the Obligor to maintain such physical loss and
damage insurance naming the Seller and its successors and assigns as an
additional insured, (ii) each Receivable that finances the cost of
premiums for credit life and credit accident and health insurance is
covered by an insurance policy or certificate naming the Seller as
policyholder (creditor) and (iii) as to each Receivable that finances
the cost of an extended service contract, the respective Financed
Vehicle which secures the Receivable is covered by an extended service
contract (each, a "RECEIVABLES INSURANCE POLICY").
(b) To the extent applicable, the Servicer shall not take any
action which would result in noncoverage under any Receivables
Insurance Policy which, but for the actions of the Servicer, would have
been covered thereunder. The Servicer, on behalf of the Purchaser,
shall take such reasonable action as shall be necessary to permit
recovery under each Receivables Insurance Policy. Any amounts collected
by the Servicer under any Receivables Insurance Policy, including,
without limitation, proceeds thereof, shall be deposited in the
Collection Account within two (2) Business Days of receipt.
SECTION 4.5. MAINTENANCE OF SECURITY INTERESTS IN VEHICLES.
(a) Consistent with the policies and procedures required by
this Agreement, the Servicer shall take such steps on behalf of the
Purchaser as are necessary to maintain perfection of the security
interest created by each Receivable in the related Financed Vehicle,
including but not limited to obtaining the authorization or execution
by the Obligors and the recording, registering, filing, re-recording,
re-registering and refiling of all security agreements, financing
statements and continuation statements or instruments as are necessary
to maintain the security interest granted by the Obligors under the
respective Receivables. The Trustee hereby authorizes the Servicer, and
the Servicer agrees, to take any and all steps necessary to re-perfect
or continue the perfection of such security interest on behalf of the
Purchaser and the Noteholder as necessary because of the relocation of
a Financed Vehicle or for any other reason. In the event that the
assignment of a Receivable to the Purchaser, and the pledge thereof by
the Purchaser to the Trustee is insufficient, without a notation on the
related Financed Vehicle's certificate of title, or without fulfilling
any additional administrative requirements under the laws of the state
in which the Financed Vehicle is located, to perfect a security
interest in the related Financed Vehicle in favor of the Trustee, each
of the Trustee, the Controlling Party and the Seller hereby agrees that
the designation of the Seller or TFC (as applicable), as the secured
party on the certificate of title is in respect of the Seller's or
TFC's capacity as Servicer or subservicer, respectively, as agent of
the Trustee for the benefit of the Noteholder.
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(b) Upon the occurrence of an Event of Default or Servicer
Termination Event, the Trustee, and the Servicer shall take or cause to
be taken such action as may, in the opinion of counsel to the Trustee,
which opinion shall not be an expense of the Trustee, be necessary to
perfect or re-perfect the security interests in the Financed Vehicles
securing the Receivables in the name of the Trustee on behalf of the
Noteholder by amending the title documents of such Financed Vehicles or
by such other reasonable means as may, in the opinion of counsel to the
Trustee, which opinion shall not be an expense of the Trustee, be
necessary or prudent. The Seller hereby agrees to pay all expenses
related to such perfection or re-perfection and to take all action
necessary therefor. In addition, prior to the occurrence of an Event of
Default or a Servicer Termination Event, the Controlling Party may
instruct the Trustee and the Servicer to take or cause to be taken such
action as may, in the opinion of counsel to the Controlling Party, be
necessary to perfect or re-perfect the security interest in the
Financed Vehicles underlying the Receivables in the name of the Trustee
on behalf of the Noteholder, including by amending the title documents
of such Financed Vehicles or by such other reasonable means as may, in
the opinion of counsel to the Controlling Party, be necessary or
prudent; PROVIDED, HOWEVER, that if the Controlling Party requests that
the title documents be amended prior to the occurrence of an Event of
Default or a Servicer Termination Event, the Trustee or Servicer, as
the case may be, shall carry out such action only to the extent that
the out-of-pocket expenses of the Servicer or the Trustee, as the case
may be, shall be reimbursed by the Controlling Party.
SECTION 4.6. ADDITIONAL COVENANTS OF SERVICER.
(a) The Servicer shall not release the Financed Vehicle
securing each Receivable from the security interest granted by such
Receivable in whole or in part except in the event of payment in full
by the Obligor thereunder or repossession or other liquidation of the
Financed Vehicle, nor shall the Servicer impair the rights of the
Noteholder in such Receivables, nor shall the Servicer amend or
otherwise modify a Receivable, except as permitted in accordance with
SECTION 4.2.
(b) The Servicer shall obtain and/or maintain all necessary
licenses, approvals, authorizations, orders or other actions of any
person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with
the execution, delivery and performance of this Agreement and the other
Basic Documents.
SECTION 4.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT.
Upon discovery by any of the Servicer, the Purchaser, the Controlling
Party or the Trustee of a breach of any of the covenants of the Servicer set
forth in SECTIONS 4.2(a), 4.4, 4.5 or 4.6, the party discovering such breach
shall give prompt written notice to the others; PROVIDED, HOWEVER, that the
failure to give any such notice shall not affect any obligation of the Servicer
under this SECTION 4.7. Unless the breach shall have been cured by the last day
of the next Accrual Period following such discovery, the Servicer shall purchase
any Receivable materially and adversely affected by such breach. In
consideration of the purchase of such Receivable, the Servicer shall remit the
Purchase Amount for such Receivable in the manner specified in SECTION 5.6. The
sole remedy of the Trustee, the Purchaser, the Controlling Party or the
Noteholder with respect to a breach of SECTIONS 4.2(a), 4.4, 4.5 or 4.6 shall be
to require the Servicer to repurchase Receivables pursuant to this SECTION 4.7;
PROVIDED, HOWEVER, that the Servicer shall indemnify the Trustee, the Backup
Servicer, the Purchaser, the Controlling Party and the Noteholder against all
costs, expenses, losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel, which may be asserted against or incurred by any
of them as a result of third party claims arising out of the events or facts
giving rise to such breach.
SECTION 4.8. SERVICING FEE.
The "SERVICING FEE" for each Settlement Date shall be equal to the
product of one twelfth times the Servicing Fee Percentage times the Aggregate
Principal Balance of the Eligible Receivables as of the first day of the related
Accrual Period. The Servicing Fee shall also include all late fees, prepayment
charges including, in the case of a Rule of 78's Receivable that is prepaid in
full, to the extent not required by law to be remitted to the related Obligor,
the difference between the Principal Balance of such Rule of 78's Receivable
(plus accrued interest to the date of prepayment) and the principal balance of
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such Receivable computed according to the "Rule of 78's", and other
administrative fees or similar charges allowed by applicable law with respect to
Receivables, collected (from whatever source) on the Receivables. If the Backup
Servicer becomes the successor Servicer, the "Servicing Fee" payable to the
Backup Servicer as successor Servicer shall be determined in accordance with the
Fee Schedule.
SECTION 4.9. SERVICER'S CERTIFICATE.
No later than 12:00 noon New York City time on each Determination Date,
the Servicer shall deliver (facsimile delivery being acceptable) to the Trustee,
the Rating Agencies, the Controlling Party and the Purchaser, a certificate
substantially in the form of EXHIBIT A hereto (a "SERVICER'S CERTIFICATE")
containing among other things, (i) all information necessary to enable the
Trustee to make any withdrawal and deposit required by SECTION 5.5 and to make
the distributions required by SECTION 5.7, (ii) the total number of Receivable
Files held (in whole or in part) by the Servicer rather than the Trustee at the
end of the applicable Accrual Period, (iii) all information necessary for the
Trustee to send the statements required by SECTIONS 5.8(b) and 5.9, (iv) a
listing of all Purchased Receivables purchased as of the related Accounting
Date, identifying the Receivables so purchased, (v) the calculation of the
Borrowing Base, the CPS Borrowing Base and the TFC Borrowing Base and (vi) all
information necessary to enable the Backup Servicer to verify the information
specified in SECTION 4.14(b) and to complete the accounting required by SECTION
5.9, including to the extent necessary, a breakdown of the information relating
to the CPS Receivables and the TFC Receivables. Receivables purchased by the
Servicer or by the Seller from the Purchaser in accordance with this Agreement
by the related Accounting Date and each Receivable which became a Liquidated
Receivable or which was paid in full during the related Accrual Period shall be
identified by account number (as set forth in the Schedule of Receivables). In
addition to the information set forth in the preceding sentence, the Servicer's
Certificate shall also state whether to the knowledge of the Servicer, a
Servicer Termination Event, a Funding Termination Event or a TFC Funding
Termination Event has occurred.
SECTION 4.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF SERVICER
TERMINATION EVENT.
(a) The Servicer shall deliver to the Purchaser, to the
Trustee for delivery to the Controlling Party and the Noteholder, the
Backup Servicer and each Rating Agency, on or before February 28 of
each year beginning February 28, 2006, an Officer's Certificate, dated
as of December 31 of the preceding year, stating that (i) a review of
the activities of the Servicer during the preceding 12-month period
(or, in the case of the first such certificate, the period from the
date of this Agreement to December 31, 2005) and of its performance
under this Agreement has been made under such officer's supervision and
(ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement
throughout such year (or, in the case of the first such certificate,
such shorter period), or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known
to such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, the Controlling
Party and the Noteholder, the Backup Servicer and each Rating Agency,
promptly after having obtained knowledge thereof, but in no event later
than two (2) Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of
time, or both, would become a Servicer Termination Event under SECTION
10.1.
SECTION 4.11. INDEPENDENT ACCOUNTANTS' REPORTS.
Unless the Backup Servicer is the Servicer, the Servicer shall cause a
firm of nationally recognized independent certified public accountants (the
"INDEPENDENT ACCOUNTANTS"), who may also render other services to the Servicer
or to the Purchaser, to deliver to the Trustee, the Backup Servicer, the
Controlling Party, the Noteholder and each Rating Agency, on or before March 31
of each year beginning March 31, 2006, a report dated as of December 31 of the
preceding year (the "ACCOUNTANTS' REPORT") and reviewing the Servicer's
activities during the preceding 12-month period, addressed to the Board of
Directors of the Servicer, to the Trustee, the Backup Servicer, the Controlling
Party and the Noteholder, to the effect that such firm has examined the
financial statements of the Servicer and issued its report therefor and that
such examination (1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as such firm considered necessary in the
17
circumstances; (2) included tests relating to auto loans serviced for others in
accordance with the requirements of the Uniform Single Attestation Program for
Mortgage Bankers (the "PROGRAM"), to the extent the procedures in the Program
are applicable to the servicing obligations set forth in this Agreement; (3)
included an examination of the delinquency and loss statistics relating to the
Servicer's portfolio of automobile and light truck installment sale contracts;
and (4) except as described in the report, disclosed no exceptions or errors in
the records relating to automobile and light truck loans serviced for others
that, in the firm's opinion, paragraph four of the Program requires such firm to
report. The Accountants' Report shall further state that (x) a review in
accordance with agreed upon procedures was made of two randomly selected
Servicer's Certificates; (y) except as disclosed in the report, no exceptions or
errors in the Servicer's Certificates were found; and (z) the delinquency and
loss information relating to the Receivables and the stated amount of Liquidated
Receivables, if any, contained in the Servicer's Certificates were found to be
accurate. In the event such firm requires the Trustee and/or the Backup Servicer
to agree to the procedures performed by such firm, the Servicer shall direct the
Trustee and/or the Backup Servicer, as applicable, in writing to so agree; it
being understood and agreed that the Trustee and/or the Backup Servicer will
deliver such letter of agreement in conclusive reliance upon the direction of
the Servicer, and neither the Trustee nor the Backup Servicer makes any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures. The Report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12. INDEPENDENT ACCOUNTANTS' REVIEW OF RECEIVABLES FILES.
Commencing on June 30, 2005, and, thereafter on each September 30,
December 31, March 31 and June 30 (or, with respect to each such date, upon the
date of the closing of Seller's next occurring "CPS Auto Receivables Trust" term
securitization transaction) prior to the Final Scheduled Settlement Date, to the
extent that the average daily outstanding Invested Amount during the calendar
quarter then ending was more than $25 million (or such other dates as the
Controlling Party may determine in its reasonable discretion from time to time
by prior written notice to the Seller, the Servicer and the Trustee), but in no
case less than twice in any calendar year, the Seller at its own expense shall
cause Independent Accountants reasonably acceptable to the Controlling Party to
conduct a post-funding review of the Seller's compliance with its stated
underwriting policies and verify certain characteristics of the Receivables as
of each Funding Date. The Independent Accountants shall within ten Business Days
complete such physical inspection and limited review and execute and deliver to
Seller, the Servicer, the Purchaser, the Trustee and the Controlling Party a
report with respect to a statistically significant sample of Receivables
substantially in the form of EXHIBIT E hereto (which report shall be considered
substantially in the form of EXHIBIT E if such report is a report issued by the
Independent Accountants in connection with their physical inspection and limited
review conducted in connection with the Seller's "CPS Auto Receivables Trust"
term securitization transactions generally closing on or about the end of each
calendar quarter). If such review reveals, in the Controlling Party's reasonable
opinion, an unsatisfactory number of exceptions, the Controlling Party, in its
reasonable discretion, may require another review of a similarly sized
statistically significant sample of Receivables. If such second review reveals,
in the Controlling Party's reasonable opinion, an unsatisfactory number of
exceptions, the Controlling Party, in its reasonable discretion, may require a
full review of all Receivables by the Independent Accountants at the expense of
the Seller. The Trustee must receive no less than 5 Business Days' prior written
notice of any review of the Receivables Files under this SECTION 4.12. The
Servicer shall be required to pay any and all costs incurred by the Trustee in
connection with any such review.
SECTION 4.13. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES.
The Servicer shall provide to representatives of the Trustee, the
Backup Servicer and the Controlling Party (or the Controlling Party's designee)
reasonable access to the documentation regarding the Receivables. In each case,
such access shall be afforded without charge but only upon reasonable request
and during normal business hours. Nothing in this Section shall derogate from
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section.
SECTION 4.14. VERIFICATION OF SERVICER'S CERTIFICATE.
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(a) Concurrently with the delivery by the Servicer of the
Servicer's Certificate each month, the Servicer will deliver to the
Trustee and the Backup Servicer a computer diskette (or other
electronic transmission) in a format acceptable to the Trustee and the
Backup Servicer containing information with respect to the Receivables
as of the close of business on the last day of the preceding Interest
Period which information is necessary for preparation of the Servicer's
Certificate. The Backup Servicer shall use such computer diskette (or
other electronic transmission) to verify certain information specified
in SECTION 4.14(b) contained in the Servicer's Certificate delivered by
the Servicer, and the Backup Servicer shall notify the Servicer and the
Controlling Party of any discrepancies on or before the second Business
Day following the Determination Date. In the event that the Backup
Servicer reports any discrepancies, the Servicer and the Backup
Servicer shall attempt to reconcile such discrepancies by the related
Settlement Date, but in the absence of a reconciliation, the Servicer's
Certificate shall control for the purpose of calculations and
distributions with respect to the related Settlement Date. In the event
that the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to a Servicer's Certificate by the related
Settlement Date, the Backup Servicer shall notify the Controlling Party
thereof in writing and the Servicer shall cause a firm of Independent
Accountants, at the Servicer's expense, to audit the Servicer's
Certificate and, prior to the fifth day of the following calendar
month, reconcile the discrepancies. The effect, if any, of such
reconciliation shall be reflected in the Servicer's Certificate for
such next succeeding Determination Date. Other than the duties
specifically set forth in this Agreement, the Backup Servicer shall
have no obligations hereunder, including, without limitation, to
supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer shall have no liability for any actions
taken or omitted by the Servicer. The duties and obligations of the
Backup Servicer shall be determined solely by the express provisions of
this Agreement and no implied covenants or obligations shall be read
into this Agreement against the Backup Servicer.
(b) The Backup Servicer shall review each Servicer's
Certificate delivered pursuant to Section 4.14(a) and shall:
(i) confirm that such Servicer's Certificate is complete on
its face;
(ii) load the computer diskette (which shall be in a format
acceptable to the Backup Servicer) received from the Servicer pursuant
to SECTION 4.14(a) hereof, confirm that such computer diskette is in a
readable form and calculate and confirm the Aggregate Principal Balance
of the Receivables for the most recent Settlement Date; and
(iii) confirm that Available Funds, the Noteholder's Principal
Distributable Amount, the Noteholder's Interest Distributable Amount,
the Servicing Fee, the Backup Servicing Fee, the Unused Facility Fee,
the Trustee Fee, and the Owner Trustee Fee in the Servicer's
Certificate are accurate based solely on the recalculation of the
Servicer's Certificate.
(c) Within 90 days of the date of this Agreement, the Backup
Servicer will cause an affiliate of the Backup Servicer to data map to
its servicing system all servicing/loan file information, including all
relevant borrower contact information such as address and phone numbers
as well as loan balance and payment information, including comment
histories and collection notes. On or before the fifth calendar day of
each month, the Servicer will provide to an affiliate of the Backup
Servicer an electronic transmission of all servicing/loan information,
including all relevant borrower contact information such as address and
phone numbers as well as loan balance and payment information,
including comment histories and collection notes, and the Backup
Servicer will cause such affiliate to review each file to ensure that
it is in readable form and verify that the data balances conform to the
trial balance reports received from the Servicer. Additionally, the
Backup Servicer shall cause such affiliate to store each such file.
SECTION 4.15. RETENTION AND TERMINATION OF SERVICER.
As long as the Seller acts as Servicer, the Servicer hereby covenants
and agrees to act as such under this Agreement for an initial term commencing on
the Closing Date and ending on June 30, 2005, which term may be extended by the
Controlling Party for successive quarterly terms ending on each successive
September 30, December 31, March 31 and June 30 pursuant to written instructions
19
delivered by the Controlling Party to the Servicer and the Trustee (or, at the
discretion of the Controlling Party exercised pursuant to revocable written
standing instructions from time to time to the Servicer and the Trustee, for any
specified number of terms greater than one), until the Termination Date (each
such notice, including each notice pursuant to standing instructions, which
shall be deemed delivered at the end of successive terms for so long as such
instructions are in effect, a "SERVICER EXTENSION NOTICE"). The Servicer hereby
agrees that, upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound, for the duration of the term covered by such
Servicer Extension Notice, to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. The Trustee agrees that
if as of the fifteenth day prior to the last day of any term of the Servicer,
the Trustee shall not have received any Servicer Extension Notice from the
Controlling Party, the Trustee shall, within five days thereafter, give written
notice of such non-receipt to the Controlling Party and the Servicer and the
Servicer's term shall not be extended unless a Servicer Extension Notice is
received on or before the last day of such term.
SECTION 4.16. FIDELITY BOND.
The Servicer shall maintain a fidelity bond in such form and amount as
is customary for entities acting as custodian of funds and documents in respect
of consumer contracts on behalf of institutional investors.
SECTION 4.17. LIEN SEARCHES; OPINIONS AS TO TRANSFERS AND SECURITY
INTERESTS.
The Servicer shall, on the Closing Date and, thereafter annually on or
before each anniversary of the Closing Date, deliver (or cause to be delivered)
to the Trustee and the Controlling Party an Opinion of Counsel, in form and
substance satisfactory to the Controlling Party, with respect to (a) the "true
sale" nature of the transfers of Receivables and, to the extent applicable,
related Other Conveyed Property hereunder and under each related Assignment, (b)
the "backup security interest" with respect to the transfers of Receivables and,
to the extent applicable, related Other Conveyed Property hereunder and under
each related Assignment, (c) the validity of the security interest in connection
with the pledge of Collateral to the Trustee under the Indenture on each Funding
Date and (d) the perfection and first priority of the transfers and pledges
referred to in CLAUSES (a)-(c) above. To the extent each such Opinion of Counsel
is in any manner reliant on UCC lien searches, each such UCC lien search shall
be dated no earlier than ten Business Days prior to the date of each such
related Opinion of Counsel, and shall be accompanied by officer's certificates
from the appropriate parties certifying that no filings subsequent to the date
of such lien searches have been made. Such Opinion of Counsel shall state, among
other things, that, in the opinion of such counsel, either (A) all financing
statements and continuation statements have been authorized and filed that are
necessary to perfect the interest of the Purchaser and the Trustee in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) no such action shall
be necessary to preserve and protect such interest. The Opinion of Counsel
referred to in this SECTION 4.17 shall specify any action necessary (as of the
date of such opinion) to be taken to preserve and protect such interest.
SECTION 4.18. SUBSERVICING ARRANGEMENTS.
The Servicer may arrange for the subservicing of all or any portion of
the Receivables by a subservicer; provided, however, that such subservicing
arrangement must provide for the servicing of such Receivables in a manner
consistent with the servicing arrangements contemplated hereunder; provided,
further, that any such subservicing arrangement with a Person that is not an
Affiliate of CPS shall require the prior written consent of the Controlling
Party. Unless the context otherwise requires, references in this Agreement to
actions taken or to be taken by the Servicer in servicing the Receivables
include actions taken or to be taken by a subservicer on behalf of the Servicer.
Notwithstanding the provisions of any subservicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a subservicer or reference to actions taken through a subservicer
or otherwise, the Servicer shall remain obligated and liable to the Purchaser,
the Trustee, the Backup Servicer, the Controlling Party and the Noteholder for
the servicing and administration of the Receivables in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of such subservicing agreements or arrangements or by virtue of
indemnification from the subservicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Receivables. All actions of each subservicer performed pursuant to a
subservicing arrangement shall be performed as an agent of the Servicer with the
same force and effect as if performed directly by the Servicer. The subservicer
under each subservicing arrangement shall be engaged by the Servicer upon terms
consistent with the engagement of the Servicer hereunder. Each subservicer shall
be simultaneously terminated in the event that the Servicer is terminated
hereunder. In addition, if a subservicing arrangement relates to TFC
Receivables, the related subservicer may be terminated by the Controlling Party
upon the occurrence of a TFC Funding Termination Event. The fees paid by the
Servicer to the related subservicer under each subservicing arrangement shall
not exceed the Servicing Fees paid to the Servicer hereunder.
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ARTICLE V
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ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO THE NOTEHOLDER
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SECTION 5.1. ESTABLISHMENT OF PLEDGED ACCOUNTS.
(a) The Trustee, on behalf of the Noteholder, shall establish
and maintain in its own name an Eligible Account (the "COLLECTION
ACCOUNT"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of
the Noteholder. The Collection Account shall initially be established
with the Trustee.
(b) The Trustee, on behalf of the Noteholder, shall establish
and maintain in its own name an Eligible Account (the "NOTE
DISTRIBUTION ACCOUNT"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Trustee on
behalf of the Noteholder. The Note Distribution Account shall initially
be established with the Trustee.
(c) The Trustee, on behalf of the Noteholder shall establish
and maintain in its own name an Eligible Account (the "PRINCIPAL
FUNDING ACCOUNT"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Trustee on
behalf of the Noteholder. The Principal Funding Account shall initially
be established with the Trustee.
(d) The Trustee, on behalf of the Noteholder shall establish
and maintain in its own name an Eligible Account (the "RESERVE
ACCOUNT"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of
the Noteholder. The Reserve Account shall initially be established with
the Trustee.
(e) Funds on deposit in the Collection Account, the Principal
Funding Account, the Reserve Account and the Note Distribution Account
(collectively, the "PLEDGED ACCOUNTS") shall be invested by the Trustee
(or any custodian with respect to funds on deposit in any such account)
in Eligible Investments selected in writing by the Servicer or, after
the resignation or termination of CPS as Servicer, by the Controlling
Party (pursuant to standing instructions or otherwise). All such
Eligible Investments shall be held by or on behalf of the Trustee for
the benefit of the Noteholder. Other than as permitted by the Rating
Agencies and the Controlling Party, funds on deposit in any Pledged
Account shall be invested in Eligible Investments that will mature so
that such funds will be available at the close of business on the
Business Day immediately preceding the following Draw Date. Funds
deposited in a Pledged Account on the day immediately preceding a
Settlement Date upon the maturity of any Eligible Investments are not
required to be invested overnight. All Eligible Investments will be
held to maturity.
(f) All investment earnings of moneys deposited in the Pledged
Accounts shall be deposited (or caused to be deposited) by the Trustee
in the Collection Account for distribution pursuant to SECTION 5.7(a),
and any loss resulting from such investments shall be charged to such
account. The Servicer will not direct the Trustee to make any
investment of any funds held in any of the Pledged Accounts unless the
security interest granted and perfected in such account will continue
to be perfected in such investment, in either case without any further
action by any Person, and, in connection with any direction to the
Trustee to make any such investment, if requested by the Trustee, the
Servicer shall deliver to the Trustee an Opinion of Counsel, acceptable
to the Trustee, to such effect.
(g) The Trustee shall not in any way be held liable by reason
of any insufficiency in any of the Pledged Accounts resulting from any
loss on any Eligible Investment included therein except for losses
attributable to the Trustee's negligence or bad faith or its failure to
make payments on such Eligible Investments issued by the Trustee, in
its commercial capacity as principal obligor and not as trustee, in
accordance with their terms.
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(h) If (i) the Servicer or the Controlling Party, as
applicable, shall have failed to give investment directions for any
funds on deposit in the Pledged Accounts to the Trustee by 1:00 p.m.
Eastern Time (or such other time as may be agreed by the Purchaser and
Trustee) on any Business Day; or (ii) an Event of Default shall have
occurred and be continuing with respect to the Note but the Note shall
not have been declared due and payable, or, if the Note shall have been
declared due and payable following an Event of Default, amounts
collected or receivable from the Receivables and the Other Conveyed
Property are being applied as if there had not been such a declaration;
then the Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Pledged Accounts in an Eligible Investment
described in PARAGRAPH (f) the definition thereof.
(i) The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Pledged Accounts and in
all proceeds thereof (including all Investment Earnings on the Pledged
Accounts) and all such funds, investments, proceeds and income shall be
part of the Other Conveyed Property. Except as otherwise provided
herein, the Pledged Accounts shall be under the sole dominion and
control of the Trustee for the benefit of the Noteholder. If at any
time any of the Pledged Accounts ceases to be an Eligible Account, the
Servicer with the consent of the Controlling Party shall within five
Business Days establish a new Pledged Account as an Eligible Account
and shall transfer any cash and/or any investments to such new Pledged
Account. The Servicer shall promptly notify the Rating Agencies, the
Trustee and the Controlling Party of any change in the location of any
of the aforementioned accounts. In connection with the foregoing, the
Servicer agrees that, in the event that any of the Pledged Accounts are
not accounts with the Trustee, the Servicer shall notify the Trustee
and the Controlling Party in writing promptly upon any of such Pledged
Accounts ceasing to be an Eligible Account.
(j) Notwithstanding anything to the contrary herein or in any
other document relating to a Trust Account, the "securities
intermediary's jurisdiction" (within the meaning of Section 8-110 of
the UCC) or the "bank's jurisdiction" (with the meaning of 9-304 of the
UCC) as applicable, with respect to each Pledged Account shall be the
State of New York.
(k) With respect to the Pledged Account Property, the Trustee
agrees that:
(i) any Pledged Account Property that is held in
deposit accounts shall be held solely in an Eligible Account;
and, except as otherwise provided herein, each such Eligible
Account shall be subject to the exclusive custody and control
of the Trustee and the Trustee shall have sole signature
authority with respect thereto;
(ii) any Pledged Account Property shall be delivered
to the Trustee in accordance with the definition of
"DELIVERY"; and
(iii) the Servicer shall have the power, revocable by
the Controlling Party, to instruct the Trustee to make
withdrawals and payments from the Pledged Accounts for the
purpose of permitting the Servicer and the Trustee to carry
out their respective duties hereunder.
SECTION 5.2. [RESERVED].
SECTION 5.3. CERTAIN REIMBURSEMENTS TO THE SERVICER.
The Servicer will be entitled to be reimbursed from amounts on deposit
in the Collection Account with respect to an Accrual Period for amounts
previously deposited in the Collection Account but later determined by the
Servicer to have resulted from mistaken deposits or postings or checks returned
for insufficient funds. The amount to be reimbursed hereunder shall be paid to
the Servicer on the related Settlement Date pursuant to SECTION 5.7(A)(III) upon
certification by the Servicer of such amounts and the provision of such
information to the Trustee and the Controlling Party as may be necessary in the
opinion of the Controlling Party to verify the accuracy of such certification;
provided, however, that the Servicer must provide such certification within
three months of it becoming aware of such mistaken deposit, posting or returned
check. In the event that the Controlling Party has not received evidence
satisfactory to it of the Servicer's entitlement to reimbursement pursuant to
this Section, the Controlling Party shall give the Trustee notice to such
effect, following receipt of which the Trustee shall not make a distribution to
22
the Servicer in respect of such amount pursuant to SECTION 5.7, or if prior
thereto the Servicer has been reimbursed pursuant to SECTION 5.7, the Trustee
shall withhold such amounts from amounts otherwise distributable to the Servicer
on the next succeeding Settlement Date.
SECTION 5.4. APPLICATION OF COLLECTIONS.
All collections for each Accrual Period shall be applied by the
Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied, in the case of a Rule
of 78's Receivable, first, to the Scheduled Receivable Payment of such Rule of
78's Receivable and, second, to any late fees accrued with respect to such Rule
of 78's Receivable and, in the case of a Simple Interest Receivable, to interest
and principal in accordance with the Simple Interest Method.
SECTION 5.5. RESERVE ACCOUNT.
(a) The Reserve Account will be held for the benefit of the
Noteholder. On or prior to the Closing Date, the Purchaser shall
deposit or cause to be deposited into the Reserve Account an amount
equal to the Required Reserve Account Amount. On each Funding Date, the
Purchaser shall deposit a portion of the related Advance into the
Reserve Account until the amount on deposit in the Reserve Account
equals the Required Reserve Account Amount.
(b) In the event that the Servicer's Certificate with respect
to any Determination Date shall state that the Available Funds with
respect to the related Settlement Date are insufficient to make the
payments required to be made on the related Settlement Date pursuant to
SECTIONS 5.7(a)(i) through (v) and (viii) (such deficiency being a
"DEFICIENCY CLAIM AMOUNT"), then on the Deficiency Claim Date, the
Trustee shall deliver to the Controlling Party and the Servicer, by
hand delivery, telex or facsimile transmission, a written notice (a
"DEFICIENCY Notice") specifying the Deficiency Claim Amount for such
Settlement Date. The Trustee shall withdraw an amount equal to such
Deficiency Claim Amount from the Reserve Account (to the extent of the
funds available on deposit therein) for deposit in the Collection
Account on the related Settlement Date and distribution pursuant to
SECTIONS 5.7(a)(i) through (v) and (viii), as applicable. Any
Deficiency Notice shall be delivered by 10:00 a.m., New York City time,
on the Deficiency Claim Date.
(c) In the event that the Trustee has delivered a Deficiency
Notice with respect to any Determination Date pursuant to SECTION
5.5(B), the Trustee shall on the related Deficiency Claim Date
determine whether the application of funds in accordance with SECTION
5.7(a) and the application of any Deficiency Claim Amount pursuant to
SECTION 5.5(b) and, if applicable, SECTION 5.5(d) would result in a
shortfall in amounts distributable pursuant to SECTIONS 5.7(a)(iv) on
any Settlement Date and SECTION 5.7(a)(v) on any Settlement Date
occurring on or after the Final Scheduled Settlement Date. If the
Trustee determines that such amount for such Settlement Date is greater
than zero, the Trustee shall furnish to the Controlling Party no later
than 10:00 a.m. New York City time on the related Deficiency Claim Date
a notice substantially in the form of Exhibit D hereto setting forth
such amount.
(d) Following the Facility Termination Date, all amounts, or
any portion thereof, on deposit in the Reserve Account will be
deposited into the Collection Account for distribution pursuant to
SECTION 5.7.
(e) On any Settlement Date on which, after all distributions
required to be made on such Settlement Date pursuant to SECTION 5.7(A)
have been made, the amount on deposit in the Reserve Account exceeds
the Required Reserve Account Amount, the Trustee shall withdraw such
excess and distribute the same to the Purchaser or its designee in
accordance with SECTION 5.7(a)(xiii).
SECTION 5.6. ADDITIONAL DEPOSITS.
The Servicer or the Seller, as the case may be, shall deposit or cause
to be deposited in the Collection Account, in immediately available funds, (i)
the aggregate Purchase Amount with respect to Purchased Receivables on the
Business Day preceding the related Determination Date and (ii) any proceeds from
any Receivables Insurance Policies received by the Servicer with respect to
Financed Vehicles in accordance with Section 4.4(b). On the Deficiency Claim
Date, the Trustee shall remit to the Collection Account any amounts withdrawn
from the Reserve Account pursuant to SECTION 5.5.
SECTION 5.7. DISTRIBUTIONS.
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(a) On each Settlement Date, the Trustee (based on the
information contained in the Servicer's Certificate delivered on the
related Determination Date) shall make the following distributions in
the following order of priority from amounts on deposit in the
Collection Account:
(i) to the Noteholder, any payments from the Hedge
Counterparty to the extent they are due and payable in an amount equal
to the excess, if any, of the Note Interest Distributable Amount over
Capped Monthly Interest;
(ii) to the Backup Servicer (so long as the Backup Servicer is
not the Servicer), the Trustee and the Owner Trustee, from Available
Funds and any amounts deposited in the Collection Account pursuant to
SECTIONS 5.5(b) and 5.5(d), in respect of (A) Backup Servicing Fees,
Trustee Fees and Owner Trustee Fees, respectively, reasonable expenses
incurred in connection with transitioning the servicing to the Backup
Servicer, and all other reasonable out-of-pocket expenses of the Backup
Servicer, the Trustee and the Owner Trustee (including counsel fees and
expenses), and (B) all unpaid Backup Servicing Fees (so long as the
Backup Servicer is not acting as successor Servicer), Trustee Fees,
Owner Trustee Fees, reasonable expenses incurred in connection with
transitioning the servicing to the Backup Servicer and all other
reasonable out-of-pocket expenses of the Backup Servicer, Trustee and
Owner Trustee (including counsel fees and expenses) from prior Accrual
Periods PROVIDED, HOWEVER, that expenses payable to each of the Backup
Servicer, Trustee and Owner Trustee pursuant to this CLAUSE (ii),
excluding amounts paid to the Backup Servicer in respect of transition
expenses, shall be limited to a total of $25,000 per annum; PROVIDED,
FURTHER, that the amount of transition expenses distributed to the
Backup Servicer during the term of this Agreement pursuant to this
CLAUSE (ii) shall in no case exceed $50,000 in the aggregate;
(iii) to the Servicer, from Available Funds and any amounts
deposited in the Collection Account pursuant to SECTIONS 5.5(b) and
5.5(d), in respect of Servicing Fees, the Servicing Fee and all unpaid
Servicing Fees from prior Accrual Periods and all reimbursements to
which the Servicer is entitled pursuant to SECTION 5.3;
(iv) to the Note Distribution Account, from Available Funds
and any amounts deposited in the Collection Account pursuant to
SECTIONS 5.5(b) and 5.5(d), the Capped Monthly Interest;
(v) to the Note Distribution Account, from Available Funds and
any amounts deposited in the Collection Account pursuant to SECTIONS
5.5(b) and 5.5(d), the Noteholder's Principal Distributable Amount for
such Settlement Date;
(vi) to the Note Distribution Account, from Available Funds
and any amounts deposited in the Collection Account pursuant to SECTION
5.5(d), the Additional Principal Payment Amount for such Settlement
Date;
(vii) so long as any amounts are outstanding on the Note, to
the Trustee, for deposit in the Reserve Account, from Available Funds,
an amount equal to the excess of (A) the Required Reserve Account
Amount for such Settlement Date over (B) the amount on deposit in the
Reserve Account;
(viii) to the Note Distribution Account, from Available Funds
and any amounts deposited in the Collection Account pursuant to
SECTIONS 5.5(b) and 5.5(d), the Noteholder's Interest Distributable
Amount for such Settlement Date, to the extent not previously paid
pursuant to SECTION 5.7(a)(i) and SECTION 5.7(a)(iv) above;
(ix) to the Noteholder, from Available Funds and any amounts
deposited in the Collection Account pursuant to SECTION 5.5(d), the
Unused Facility Fee for such Settlement Date;
(x) if any Person other than the Backup Servicer becomes the
successor Servicer, to such successor Servicer from Available Funds and
any amounts deposited in the Collection Account pursuant to SECTION
5.5(D), its servicing fees in excess of the Servicing Fee and, to the
extent not previously paid by the predecessor Servicer pursuant to this
Agreement, reasonable transition expenses (up to a maximum of $50,000
for all such expenses) incurred in becoming the successor Servicer;
(xi) to the Note Distribution Account, from Available Funds
and any amounts deposited in the Collection Account pursuant to SECTION
5.5(D), any other amounts due to the Noteholder, the Controlling Party
and the Committed Note Purchaser pursuant to the Basic Documents;
24
(xii) to the Backup Servicer, the Owner Trustee and the
Trustee, as applicable, pro rata, from Available Funds and any amounts
deposited in the Collection Account pursuant to SECTION 5.5(d), in
respect of reasonable out of pocket expenses thereof (including counsel
fees and expenses) and reasonable out of pocket expenses (including
counsel fees and expenses) from prior Accrual Periods to the extent not
paid thereto pursuant to SECTION 5.7(a)(ii) above; and
(xiii) to the Certificateholders, the remaining Available
Funds, if any, any amounts deposited in the Collection Account pursuant
to SECTION 5.5(d) and any amounts released from the Reserve Account
pursuant to SECTION 5.5(e).
(b) In the event that the Collection Account is maintained
with an institution other than the Trustee, the Servicer shall instruct
and cause such institution to make all deposits and distributions
pursuant to SECTION 5.7(a) on the related Settlement Date.
SECTION 5.8. NOTE DISTRIBUTION ACCOUNT.
(a) On each Settlement Date (based solely on the information
contained in the Servicer's Certificate), the Trustee shall distribute
all amounts on deposit in the Note Distribution Account to the
Noteholder in respect of the Note to the extent of amounts due and
unpaid on the Note for principal and interest in the following amounts
and in the following order of priority:
(i) to the Noteholder, the Noteholder's Interest Distributable
Amount; PROVIDED that if there are not sufficient funds in the Note
Distribution Account to pay the entire amount then due on the Note, the
amount in the Note Distribution Account shall be applied to the payment
of such interest pro rata among the Holders of the Note;
(ii) to the Noteholder, in reduction of the Invested Amount,
the Noteholder's Principal Distributable Amount plus any Noteholder's
Principal Carryover Shortfall to pay principal on the Note until the
outstanding principal amount of the Note has been reduced to zero;
PROVIDED that if there are not sufficient funds in the Note
Distribution Account to pay the entire amount then due on the Note, the
amount in the Note Distribution Account shall be applied to the payment
of such principal pro rata among the Holders of the Note;
(iii) to the Noteholder, the Additional Principal Payment
Amount, PROVIDED that if there are not sufficient funds in the Note
Distribution Account to pay the aggregate outstanding principal amount
of the Note, the amount in the Note Distribution Account shall be
applied to the payment of such principal pro rata among the Holders of
the Note; and
(iv) to the Noteholder, any other amounts due the Noteholder
pursuant to the Basic Documents.
(b) On each Settlement Date, the Trustee shall provide or make
available electronically (or, upon written request, by first class mail
or facsimile) to the Controlling Party and the Noteholder the statement
or statements provided to the Trustee by the Servicer pursuant to
SECTION 5.9 hereof on such Settlement Date; PROVIDED HOWEVER, the
Trustee shall have no obligation to provide such information described
in this SECTION 5.8(b) until it has received the requisite information
from the Servicer.
SECTION 5.9. STATEMENTS TO THE NOTEHOLDER.
(a) On the Determination Date (in accordance with SECTION 4.9), the
Servicer shall provide to the Trustee, the Rating Agencies, the Controlling
Party and the Noteholder on the related Record Date a copy of the Servicer's
Certificate setting forth at least the following information as to the Note to
the extent applicable:
(i) the amount of such distribution allocable to principal of
the Note;
(ii) the amount of such distribution allocable to interest on
or with respect to the Note;
(iii) the amount, if any, of such distribution payable out of
amounts withdrawn from the Reserve Account;
(iv) the Aggregate Principal Balance as of the close of
business on the last day of the preceding Accrual Period;
25
(v) the aggregate outstanding principal amount of the Note;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Accrual Period, and the amount of any unpaid
Servicing Fees and the change in such amount from the prior Settlement
Date;
(vii) the amount of each of the Backup Servicing Fee, the
Owner Trustee Fee and the Trustee Fee paid to the Backup Servicer, the
Owner Trustee and the Trustee as applicable, with respect to the
related Accrual Period, and the amount of any unpaid Backup Servicing
Fees, Owner Trustee Fees and Trustee Fees and the change in such
amounts from the prior Settlement Date;
(viii) the Noteholder's Interest Carryover Shortfall and the
Noteholder's Principal Carryover Shortfall, if any;
(ix) the number of Receivables and the aggregate gross amount
scheduled to be paid thereon, including unearned finance and other
charges, for which the related Obligors are delinquent in making
Scheduled Receivable Payments for 31 to 60 days as of the last day of
the related Accrual Period;
(x) the number of Receivables and the aggregate gross amount
scheduled to be paid thereon, including unearned finance and other
charges, for which the related Obligors are delinquent in making
Scheduled Receivable Payments for 31 to 45 days as of the last day of
the related Accrual Period; and
(xi) the amount of aggregate Realized Losses, if any, for the
related Accrual Period;
(xii) the number of, and the aggregate Purchase Amounts for,
Receivables, if any, that were repurchased during the related Interest
Period and summary information as to losses and delinquencies with
respect to the Receivables as of the end of the related Accrual Period;
(xiii) the cumulative amount of Realized Losses from the
initial Cutoff Date to the last day of the related Accrual Period;
(xiv) the three month average Deferral Rate for all CPS
Managed Receivables; and
(xv) the amount of the Unused Facility Fee paid to the
Noteholder, if any.
Each amount set forth pursuant to PARAGRAPHS (i), (ii), (iii), (vi),
(vii) and (viii) above shall be expressed as a dollar amount per $1,000 of the
aggregate outstanding principal amount of the Note as of the related Settlement
Date.
(b) Within 60 days after the end of each calendar year,
commencing February 28, 2006, the Servicer shall deliver to the
Trustee, and the Trustee shall, provided it has received the necessary
information from the Servicer, promptly thereafter furnish to each
Person who at any time during the preceding calendar year was a
Noteholder of record and received any payment thereon (a) a report
(prepared by the Servicer) as to the aggregate of the amounts reported
pursuant to subclauses (i), (ii), (vi) and (vii) of SECTION 5.9(a) for
such preceding calendar year or applicable portion thereof during which
such person was the Noteholder, and (b) such information as may be
reasonably requested by the Noteholder or required by the Code and
regulations thereunder, to enable the Holder to prepare its federal and
State income tax returns. The obligation of the Trustee set forth in
this paragraph shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the
Servicer to the Noteholder pursuant to any requirements of the Code.
(c) The Trustee may make available to the Noteholder and the
Rating Agencies via the Trustee's Internet Website, all statements
described herein and, with the consent or at the direction of the
Seller, such other information regarding the Note and/or the
Receivables as the Trustee may have in its possession, but only with
the use of a password provided by the Trustee. The Trustee will make no
representation or warranties as to the accuracy or completeness of such
documents and will assume no responsibility therefore. The Trustee's
Internet Website shall be initially located at ▇▇▇.▇▇▇▇▇▇▇.▇▇▇ or at
such other address as shall be specified by the Trustee from time to
time in writing to the Noteholder. In connection with providing access
to the Trustee's Internet Website, the Trustee may require registration
and the acceptance of a disclaimer. The Trustee shall not be liable for
the dissemination of information in accordance with this Agreement.
SECTION 5.10. DIVIDEND OF INELIGIBLE RECEIVABLES.
The Issuer may, on the last day of the month in which any Receivables
are sold into a securitization transaction or on the last day of each calendar
quarter during the term of this Agreement, distribute any Ineligible Receivables
to the Seller as a dividend; PROVIDED THAT there is no Borrowing Base Deficiency
on such date.
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ARTICLE VI
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[RESERVED]
----------
ARTICLE VII
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THE PURCHASER
-------------
SECTION 7.1. REPRESENTATIONS OF PURCHASER.
The Purchaser makes the following representations on which the
Noteholder shall be deemed to have relied in purchasing the Note. The
representations speak as of the execution and delivery of this Agreement and as
of each Funding Date, and shall survive the sale of the Receivables to the
Purchaser and the pledge thereof to the Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Purchaser has been
duly formed and is validly existing as a statutory trust solely under
the laws of the state of Delaware and is in good standing under the
laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own
and pledge the Receivables and the Other Conveyed Property pledged to
the Trustee.
(b) DUE QUALIFICATION. The Purchaser is duly qualified to do
business as a foreign statutory trust in good standing, and has
obtained all necessary licenses and approvals in all jurisdictions in
which the ownership or lease of property or the conduct of its business
shall require such qualifications.
(c) POWER AND AUTHORITY. The Purchaser has the power and
authority to execute and deliver this Agreement and the other Basic
Documents to which it is a party and to carry out its terms and their
terms, respectively; the Purchaser has full power and authority to
pledge the Collateral to be pledged to the Trustee by it pursuant to
the Indenture and has duly authorized such pledge to the Trustee by all
necessary corporate action; and the execution, delivery and performance
of this Agreement and the Basic Documents to which the Purchaser is a
party have been duly authorized by the Purchaser by all necessary
action.
(d) VALID SALE. BINDING OBLIGATIONS. This Agreement effects a
valid sale of the Receivables and the Other Conveyed Property,
enforceable against the Seller and creditors of and purchasers from the
Seller, and this Agreement and the other Basic Documents to which the
Purchaser is a party, when duly executed and delivered, shall
constitute legal, valid and binding obligations of the Purchaser
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the other Basic Documents and the
fulfillment of the terms of this Agreement and the other Basic
Documents shall not conflict with, result in any breach of any of the
terms and provisions of or constitute (with or without notice, lapse of
time or both) a default under the Trust Agreement of the Purchaser, or
any indenture, agreement, mortgage, deed of trust or other instrument
to which the Purchaser is a party or by which it is bound, or result in
the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed
of trust or other instrument, other than the Basic Documents, or
violate any law, order, rule or regulation applicable to the Purchaser
of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Purchaser or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Purchaser's knowledge, threatened against the
Purchaser, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Purchaser or its properties (A) asserting the invalidity of this
Agreement, the Note or any of the Basic Documents, (B) seeking to
prevent the issuance of the Note or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic
27
Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Purchaser of its
obligations under, or the validity or enforceability of, this Agreement
or any of the Basic Documents, or (D) relating to the Purchaser and
which might adversely affect the federal or state income, excise,
franchise or similar tax attributes of the Note.
(g) NO CONSENTS. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required
for the issuance or sale of the Note or the consummation of the other
transactions contemplated by this Agreement, except such as have been
duly made or obtained or as may be required by the Basic Documents.
(h) TAX RETURNS. The Purchaser has filed all federal and state
tax returns which are required to be filed and paid all taxes,
including any assessments received by it, to the extent that such taxes
have become due. Any taxes, fees and other governmental charges payable
by the Purchaser in connection with consummation of the transactions
contemplated by this Agreement and the other Basic Documents to which
the Purchaser is a party and the fulfillment of the terms of this
Agreement and the other Basic Documents to which the Purchaser is a
party have been paid or shall have been paid at or prior to the Closing
Date and as of each Funding Date.
(i) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Purchaser is at the Corporate Trust Office of the Owner Trustee.
ARTICLE VIII
------------
THE SELLER
----------
SECTION 8.1. REPRESENTATIONS OF SELLER.
The Seller makes the following representations on which the Purchaser
is deemed to have relied in acquiring the Receivables and a which the Noteholder
are deemed to have relied in purchasing the Note. The representations speak as
of the execution and delivery of this Agreement, as of the Closing Date and as
of each Funding Date, and shall survive the sale of the Receivables to the
Purchaser and the pledge thereof by the Purchaser to the Trustee pursuant to the
Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Seller has been duly
organized and is validly existing as a corporation solely under the
laws of the State of California and is in good standing under the laws
of the State of California, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own
and sell the Receivables and the Other Conveyed Property transferred to
the Purchaser and to perform its other obligations under this Agreement
or any other Basic Documents to which it is a party.
(b) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the origination, sale and servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Agreement and the other Basic
Documents to which it is a party and to carry out its terms and their
terms, respectively; the Seller has full power and authority to sell
and assign the Receivables and the Other Conveyed Property to be sold
and assigned to and deposited with the Purchaser by it and has duly
authorized such sale and assignment to the Purchaser by all necessary
corporate action; and the execution, delivery and performance of this
Agreement and the Basic Documents to which the Seller is a party have
been duly authorized by the Seller by all necessary corporate action.
(d) VALID SALE; BINDING OBLIGATIONS. This Agreement effects a
valid sale, transfer and assignment of the Receivables and the Other
Conveyed Property to the Purchaser, enforceable against the Seller and
creditors of and purchasers from the Seller; and this Agreement and the
Basic Documents to which the Seller is a party, when duly executed and
delivered, shall constitute legal, valid and binding obligations of the
Seller enforceable in accordance with their respective terms, except as
enforceability may be limited, by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
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(e) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the Basic Documents and the
fulfillment of the terms of this Agreement and the Basic Documents does
not conflict with, result in any breach of any of the terms and
provisions of or constitute (with or without notice, lapse of time or
both) a default under the certificate of incorporation or by-laws of
the Seller, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than the Basic
Documents, or violate any law, order, rule or regulation applicable to
the Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (A) asserting the invalidity of this
Agreement, the Note or any of the Basic Documents, (B) seeking to
prevent the issuance of the Note or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic
Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement
or any of the Basic Documents, or (D) relating to the Seller and which
might adversely affect the federal or state income, excise, franchise
or similar tax attributes of the Note.
(g) NO CONSENTS. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required
for the issuance or sale of the Note or the consummation of the other
transactions contemplated by this Agreement, except such as have been
duly made or obtained.
(h) FINANCIAL CONDITION. The Seller has a positive net worth
and is able to and does pay its liabilities as they mature. The Seller
is not in default under any obligation to pay money to any Person
except for matters being disputed in good faith which do not involve an
obligation of the Seller on a promissory note. The Seller will not use
the proceeds from the transactions contemplated by the Basic Documents
to give any preference to any creditor or class of creditors, and this
transaction will not leave the Seller with remaining assets which are
unreasonably small compared to its ongoing operations.
(i) FRAUDULENT CONVEYANCE. The Seller is not selling the
Receivables to the Purchaser with any intent to hinder, delay or
defraud any of its creditors; the Seller will not be rendered insolvent
as a result of the sale of the Receivables to the Purchaser.
(j) TAX RETURNS. The Seller has filed all material federal and
state tax returns which are required to be filed and paid all material
taxes, including any assessments received by it, to the extent that
such taxes have become due (other than taxes, the amount or validity of
which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP
have been provided on the books of the Seller). Any taxes, fees and
other governmental charges payable by the Seller in connection with
consummation of the transactions contemplated by this Agreement and the
other Basic Documents to which the Seller is a party and the
fulfillment of the terms of this Agreement and the other Basic
Documents to which the Seller is a party have been paid or shall have
been paid as of each Funding Date.
(k) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and its
organizational number is 1682500.
(l) CERTIFICATE, STATEMENTS AND REPORTS. The officer's
certificates, statements, reports and other documents prepared by
Seller and furnished by Seller to the Purchaser, the Trustee or the
Controlling Party pursuant to this Agreement or any other Basic
Document to which it is a party, and in connection with the
transactions contemplated hereby or thereby, when taken as a whole, do
not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein or
therein not misleading.
29
(m) LEGAL COUNSEL, ETC. Seller consulted with its own legal
counsel and independent accountants to the extent it deems necessary
regarding the tax, accounting and regulatory consequences of the
transactions contemplated hereby, Seller is not participating in such
transactions in reliance on any representations of any other party,
their affiliates, or their counsel with respect to tax, accounting and
regulatory matters.
SECTION 8.2. ADDITIONAL COVENANTS OF THE SELLER.
(a) SALE. The Seller agrees to treat the conveyances hereunder
for all purposes (including without limitation tax and financial
accounting purposes) as sales on all relevant books, records, tax
returns, financial statements and other applicable documents.
(b) NON-PETITION. The Seller covenants and agrees that it will
not take any action to pursue any remedy that it may have against the
Purchaser hereunder, in law, in equity or otherwise, until a year and a
day have passed since the Termination Date. The Purchaser and the
Seller agree that damages will not be an adequate remedy for breach of
this covenant and that this covenant may be specifically enforced by
the Purchaser or by the Trustee or the Controlling Party on behalf of
the Noteholder.
(c) CHANGES TO SELLER'S CONTRACT PURCHASE GUIDELINES. The
Seller covenants that it will not make, or permit to be made, any
material changes to the Contract Purchase Guidelines of the Seller or
TFC, or the classification of Obligors within such programs unless (i)
the Controlling Party expressly consents in writing prior to such
changes (such consent not to be unreasonably withheld) and (ii) after
giving effect to any such changes, the Rating Agency Condition is
satisfied.
SECTION 8.3. LIABILITY OF SELLER; INDEMNITIES.
Subject to the limitation of remedies set forth in Section 3.2 hereof
with respect to a breach of any representations and warranties contained in
SECTION 3.1 hereof, the Seller shall indemnify the Purchaser, the Backup
Servicer, the Owner Trustee, the Trustee, the Controlling Party, the Noteholder
and their respective officers, directors, agents and employees for any liability
as a result of the failure of a Receivable to be originated in compliance with
all requirements of law and for any breach of any of its representations,
warranties or other agreements contained herein.
(a) The Seller shall defend, indemnify, and hold harmless the
Purchaser, the Backup Servicer, the Owner Trustee, the Trustee, the
Controlling Party, the Noteholder and their respective officers,
directors, agents and employees from and against any and all costs,
expenses, losses, damages, claims, and liabilities, arising out of or
resulting from the use, ownership, or operation by the Seller, any
Affiliate thereof or any of their respective agents or subcontractors,
of a Financed Vehicle.
(b) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Backup Servicer, the Owner Trustee, the Trustee, the
Controlling Party, the Noteholder and their respective officers,
directors, agents and employees from and against any taxes that may at
any time be asserted against any such Person with respect to the
transactions contemplated in this Agreement and any of the Basic
Documents (except any income taxes arising out of fees paid to the
Trustee, the Owner Trustee and the Backup Servicer and except any taxes
to which the Trustee may otherwise be subject), including without
limitation any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes (but, in the case of the
Purchaser, not including any taxes asserted with respect to federal or
other income taxes arising out of distributions on the Note) and costs
and expenses in defending against the same.
(c) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Backup Servicer, the Owner Trustee, the Trustee, the
Controlling Party, the Noteholder and their respective officers,
directors, agents and employees from and against any loss, liability or
expense incurred by reason of (i) the Seller's willful misfeasance, bad
faith or negligence in the performance of its duties under this
Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement and/or (ii) the Seller's or the Purchaser's
violation of Federal or state securities laws in connection with the
offering and sale of the Note.
30
(d) The Seller shall indemnify, defend and hold harmless the
Trustee, the Owner Trustee and the Backup Servicer and its officers,
directors, employees and agents from and against any and all costs,
expenses, losses, claims, damages and liabilities arising out of, or
incurred in connection with the acceptance or performance of the trusts
and duties set forth herein and in the Basic Documents except to the
extent that such cost, expense, loss, claim, damage or liability shall
be due to the willful misfeasance, bad faith or negligence (except for
errors in judgment) of the Trustee, the Owner Trustee or the Backup
Servicer.
Indemnification under this Section shall survive the resignation or
removal of the Servicer or the Trustee and the termination of this Agreement or
the Indenture, as applicable, and shall include reasonable fees and expenses of
counsel and other expenses of litigation. If the Seller shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to the Seller, without
interest.
Notwithstanding any provision of this Section 8.3 or any other
provision of this Agreement, nothing herein shall be construed as to require the
Seller to provide any indemnification hereunder or under any other Basic
Document for any costs, expenses, losses, claims, damages or liabilities arising
out of, or incurred in connection with, credit losses with respect to the
Receivables.
SECTION 8.4. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER.
Seller shall not merge or consolidate with any other person, convey,
transfer or lease substantially all its assets as an entirety to another Person,
or permit any other Person to become the successor to Seller's business unless,
after the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be capable of fulfilling the duties of
Seller contained in this Agreement. Any corporation (i) into which Seller may be
merged or consolidated, (ii) resulting from any merger or consolidation to which
Seller shall be a party, (iii) which acquires by conveyance, transfer, or lease
substantially all of the assets of Seller, or (iv) succeeding to the business of
Seller, in any of the foregoing cases shall execute an agreement of assumption
to perform every obligation of Seller under this Agreement and, whether or not
such assumption agreement is executed, shall be the successor to Seller under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement, anything in this Agreement
to the contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained
herein shall be deemed to release Seller from any obligation. Seller shall
provide notice of any merger, consolidation or succession pursuant to this
Section to the Trustee, the Controlling Party and each Rating Agency.
Notwithstanding the foregoing, Seller shall not merge or consolidate with any
other Person or permit any other Person to become a successor to Seller's
business, unless (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to SECTION 8.1 shall have been breached
(for purposes hereof, such representations and warranties shall be deemed made
as of the date of the consummation of such transaction) and no event that, after
notice or lapse of time, or both, would become an Event of Default shall have
occurred and be continuing, (y) Seller shall have delivered to the Trustee, the
Rating Agencies and the Controlling Party an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) Seller shall have delivered to the
Trustee, the Rating Agencies, the Controlling Party and the Noteholder an
Opinion of Counsel, stating in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been authorized and filed that are necessary to preserve and protect the
interest of the Purchaser and the Trustee, respectively, in the Receivables and
the Other Conveyed Property and reciting the details of the filings or (B) no
such action shall be necessary to preserve and protect such interest.
31
SECTION 8.5. LIMITATION ON LIABILITY OF SELLER AND OTHERS.
The Seller and any director or officer or employee or agent of the
Seller may rely in good faith on the advice of counsel or on any document of any
kind, prima facie properly executed and submitted by any Person respecting any
matters arising under any Basic Document. The Seller shall not be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may
involve it in any expense or liability.
SECTION 8.6. ADMINISTRATIVE DUTIES.
(a) DUTIES WITH RESPECT TO THE INDENTURE. The Servicer shall
perform all its duties and the duties of the Issuer under the
Indenture. In addition, the Servicer shall consult with the Owner
Trustee as the Servicer deems appropriate regarding the duties of the
Issuer under the Indenture. The Servicer shall monitor the performance
of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's duties under the Indenture. The
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be
the duty of the Issuer to prepare, file or deliver pursuant to the
Indenture. In furtherance of the foregoing, the Servicer shall take all
necessary action that is the duty of the Issuer to take pursuant to the
Indenture.
(b) DUTIES WITH RESPECT TO THE ISSUER.
(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Basic Documents, the Servicer shall
perform such calculations and shall prepare for execution by the Issuer
or the Owner Trustee or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the
Issuer or the Owner Trustee to prepare file or deliver pursuant to this
Agreement or any of the Basic Documents or under state and federal tax
and securities laws, and at the request of the Owner Trustee shall take
all appropriate action that it is the duty of the Issuer to take
pursuant to this Agreement or any of the Basic Documents, including,
without limitation, pursuant to SECTIONS 2.6 and 2.10 of the Trust
Agreement. The Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Receivables
(including the Basic Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer or
the Owner Trustee and are reasonably within the capability of the
Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Basic Documents to the contrary, the Servicer shall be responsible for
promptly notifying the Owner Trustee and the Trustee in the event that
any withholding tax is imposed on the Issuer's payments (or allocations
of income) to the Noteholder as contemplated this Agreement. Any such
notice shall be in writing and specify the amount of any withholding
tax required to be withheld by the Owner Trustee or the Trustee
pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer shall be responsible for
performance of the duties of the Issuer or the Seller set forth in
SECTION 5.1 of the Trust Agreement with respect to, among other things,
accounting and reports to Noteholders and Certificateholders; provided,
however, that once prepared by the Servicer, the Owner Trustee shall
retain responsibility for the distribution of the Schedule K-1 as
necessary to enable the Certificateholders to prepare their federal and
state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer
specified in SECTION 10.2 of the Trust Agreement required to be
performed in connection with the resignation or removal of the Owner
Trustee, and any other duties expressly required to be performed by the
Servicer under this Agreement or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Servicer's opinion, no less favorable to the Issuer in
any material respect.
32
(c) TAX MATTERS. The Servicer shall prepare and file, on
behalf of the Seller, all tax returns, tax elections, financial
statements and such annual or other reports of the issuer as are
necessary for preparation of tax reports as provided in Article V of
the Trust Agreement, including without limitation forms 1099 and 1066.
All tax returns will be signed by the Seller.
(d) NON-MINISTERIAL MATTERS. With respect to matters that in
the reasonable judgment of the Servicer are non-ministerial, the
Servicer shall not take any action pursuant to this Article VIII unless
within a reasonable time before the taking of such action, the Servicer
shall have notified the Owner Trustee, the Trustee and the Controlling
Party of the proposed action and the Owner Trustee and, with respect to
items (i), (ii), (iii) and (iv) below, the Trustee or the Controlling
Party shall not have withheld consent or provided an alternative
direction. For the purpose of the preceding sentence, "non-ministerial
matters" shall include:
(i) the amendment of or any supplement to the Indenture;
(ii) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Receivables);
(iii) the amendment, change or modification of this Agreement
or any of the Basic Documents;
(iv) the appointment of successor Note Registrars, successor
Paying Agents and successor Trustees pursuant to the Indenture or the
appointment of Successor Servicers or the consent to the assignment by
the Trustee of its obligations under the Indenture; and
(v) the removal of the Trustee.
(e) EXCEPTIONS. Notwithstanding anything to the contrary in
this Agreement except as expressly provided herein or in the other
Basic Documents, the Servicer, in its capacity as such hereunder, shall
not be obligated to, and shall not, (1) make any payments to the
Noteholder or Certificateholders under the Basic Documents, (2) sell
the Trust Estate pursuant to SECTION 5.4 of the Indenture, (3) take any
other action that the Issuer directs the Servicer not to take on its
behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Persons.
(f) LIMITATION OF BACKUP SERVICER'S OBLIGATIONS. The Backup
Servicer shall not be responsible for any obligations or duties of the
Servicer under SECTIONS 8.6, 8.7 or 8.8.
SECTION 8.7. RECORDS.
The Servicer shall maintain appropriate books of account and records
relating to services performed under this Agreement, which books of account and
records shall be accessible for inspection by the Issuer, the Trustee and the
Controlling Party at any time during normal business hours.
SECTION 8.8. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER.
The Servicer shall furnish to the Issuer from time to time such
additional information regarding the Receivables as the Issuer shall reasonably
request.
ARTICLE IX
----------
THE SERVICER
------------
SECTION 9.1. REPRESENTATIONS OF SERVICER.
The Servicer makes the following representations on which the Purchaser
is deemed to have relied in acquiring the Receivables and on which the
Noteholder is deemed to have relied in purchasing the Note. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date, in the case of Receivables conveyed by the Closing Date, and as of the
applicable Funding Date, in the case of Receivables conveyed by such Funding
Date, and shall survive the sale of the Receivables to the Purchaser and the
pledge thereof to the Trustee pursuant to the Indenture.
33
(a) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
organized and is validly existing as a corporation and in good standing
under the laws of the State of California, with power, authority and
legal right to own its properties and to conduct its business as such
properties are currently owned and such business is presently
conducted, and had at all relevant times, and shall have, power,
authority and legal right to acquire, own and service the Receivables.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the servicing of the Receivables as required by this
Agreement) requires or shall require such qualification except where
the failure to so qualify or obtain such licenses or consents could not
reasonably be expected to result in a material adverse effect with
respect to it or to the Receivables.
(c) POWER AND AUTHORITY. The Servicer has the power and
authority to execute and deliver this Agreement and the Basic Documents
to which it is a party and to carry out its terms and their terms,
respectively, and the execution, delivery and performance of this
Agreement and the Basic Documents to which it is a party have been duly
authorized by the Servicer by all necessary corporate action.
(d) BINDING OBLIGATION. This Agreement and the Basic Documents
to which the Servicer is a party shall constitute legal, valid and
binding obligations of the Servicer enforceable in accordance with
their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws affecting
the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or
at law.
(e) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the Basic Documents to which to the
Servicer is a party, and the fulfillment of the terms of this Agreement
and the Basic Documents to which the Servicer is a party, shall not
conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Servicer, or any
indenture, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it is bound or any of its
properties are subject, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument,
other than the Basic Documents, or violate any law, order, rule or
regulation applicable to the Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or any of its
properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Servicer or its properties (A) asserting the invalidity of this
Agreement or any of the Basic Documents, (B) seeking to prevent the
issuance of the Note or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, or (C)
other than the ▇▇▇▇▇▇ Case, seeking any determination or ruling that
might materially and adversely affect the performance by the Servicer
of its obligations under, or the validity or enforceability of this
Agreement, the Note or any of the Basic Documents or (D) relating to
the Servicer and which might adversely affect the federal or state
income, excise, franchise or similar tax attributes of the Note.
(g) NO CONSENTS. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required
for the issuance or sale of the Note or the consummation of the other
transactions contemplated by this Agreement, except such as have been
duly made or obtained.
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(h) TAXES. The Servicer has filed all material federal and
state tax returns which are required to be filed and paid all material
taxes, including any assessments received by it, to the extent that
such taxes have become due (other than taxes, the amount or validity of
which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP
have been provided on the books of the Seller). Any taxes, fees and
other governmental charges payable by the Servicer in connection with
consummation of the transactions contemplated by this Agreement and the
other Basic Documents to which the Seller is a party and the
fulfillment of the terms of this Agreement and the other Basic
Documents to which the Seller is a party have been paid or shall have
been paid as of each Funding Date.
(i) CHIEF EXECUTIVE OFFICE. The Servicer hereby represents and
warrants to the Trustee that the Servicer's principal place of business
and chief executive office is Consumer Portfolio Services, ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 9.2. LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such) shall be liable
hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Servicer and the representations made by
the Servicer.
(i) The Servicer shall defend, indemnify and hold harmless the
Purchaser, the Trustee, the Owner Trustee, the Backup Servicer, the
Noteholder, the Controlling Party and their respective officers,
directors, agents and employees from and against any and all costs,
expenses, losses, damages, claims and liabilities, arising out of or
resulting from the use, ownership, repossession or operation by the
Servicer or any Affiliate or agent or sub-contractor thereof of any
Financed Vehicle;
(ii) The Servicer, so long as CPS is the Servicer, shall
indemnify, defend and hold harmless the Purchaser, the Trustee, the
Owner Trustee, the Backup Servicer, the Noteholder, the Controlling
Party and their respective officers, directors, agents and employees
from and against any taxes that may at any time be asserted against any
of such parties with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts,
general corporation, tangible personal property, privilege or license
taxes (but not including any federal or other income taxes, including
franchise taxes asserted with respect to, and as of the date of, the
sale of the Receivables and the Other Conveyed Property to the
Purchaser, the pledge thereof to the Trustee or the issuance and
original sale of the Note) and costs and expenses in defending against
the same;
(iii) The Servicer shall indemnify, defend and hold harmless
the Purchaser, the Trustee, the Owner Trustee, the Backup Servicer, the
Controlling Party and the Noteholder and their respective officers,
directors, agents and employees from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage, or liability arose out of, or
was imposed upon the Purchaser, the Trustee, the Owner Trustee, the
Backup Servicer, the Controlling Party and the Noteholder through the
negligence, willful misfeasance or bad faith of the Servicer in the
performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties under this Agreement or as a
result of a breach of any representation, warranty or other agreement
made by the Servicer in this Agreement (without regard to any exception
relating to the ▇▇▇▇▇▇ Case);
(iv) The Servicer shall indemnify, defend, and hold harmless
the Trustee, the Owner Trustee and the Backup Servicer from and against
all costs, expenses, losses, claims, damages, and liabilities arising
out of or incurred in connection with the acceptance or performance of
the trusts and duties herein contained, except to the extent that such
cost, expense, loss, claim, damage or liability: (A) shall be due to
the willful misfeasance, bad faith, or negligence (except for errors in
judgment) of the Trustee, the Owner Trustee or the Backup Servicer, as
applicable or (B) relates to any tax other than the taxes with respect
to which the Servicer shall be required to indemnify the Trustee or the
Backup Servicer; and
35
(v) The Servicer, shall defend, indemnify and hold harmless
the Trustee, the Owner Trustee, the Backup Servicer, the Controlling
Party and the Noteholder against any and all costs, expenses, losses,
damages, claims and liabilities arising out of or resulting from the
Seller's involvement in, or the effect on any Receivable as a result
of, the ▇▇▇▇▇▇ Case and any other litigation arising out of or based on
the same set of facts.
(b) Notwithstanding the foregoing, the Servicer shall not be
obligated to defend, indemnify, and hold harmless the Noteholder for
any losses, claims, damages or liabilities incurred by the Noteholder
arising out of claims, complaints, actions and allegations relating to
Section 406 of ERISA or Section 4975 of the Code as a result of the
purchase or holding of Note by the Noteholder with the assets of a plan
subject to such provisions of ERISA or the Code.
(c) For purposes of this SECTION 9.2, in the event of the
termination of the rights and obligations of the Servicer (or any
successor thereto pursuant to SECTION 9.3) as Servicer pursuant to
SECTION 10.1, or a resignation by such Servicer pursuant to this
Agreement, such Servicer shall be deemed to be the Servicer pending
appointment of a successor Servicer pursuant to SECTION 10.2. The
provisions of this SECTION 9.2(c) shall in no way affect the survival
pursuant to SECTION 9.2(d) of the indemnification by the Servicer
provided by SECTION 9.2(a).
(d) Indemnification under this SECTION 9.2 shall survive the
termination of this Agreement and any resignation or removal of the
Seller or any successor Servicer as Servicer and shall include
reasonable fees and expenses of counsel and expenses of litigation. If
the Servicer shall have made any indemnity payments pursuant to this
Section and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts to the
Servicer, without interest.
SECTION 9.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF THE SERVICER OR BACKUP SERVICER.
(a) The Servicer shall not merge or consolidate with any other
Person, convey, transfer or lease all or substantially all of its
assets as an entirety to another Person, or permit any other Person to
become the successor to the Servicer's business unless, after the
merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be capable of fulfilling the duties
of the Servicer contained in this Agreement. Any corporation (i) into
which the Servicer may be merged or consolidated, (ii) resulting from
any merger or consolidation to which the Servicer shall be a party,
(iii) which acquires by conveyance, transfer, or lease substantially
all of the assets of the Servicer, or (iv) succeeding to the business
of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer
under this Agreement and, whether or not such assumption agreement is
executed, shall be the successor to the Servicer under this Agreement
without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this
Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that
nothing contained herein shall be deemed to release the Servicer from
any obligation. The Servicer shall provide notice of any merger,
consolidation or succession pursuant to this Section to the Trustee,
the Noteholder, the Controlling Party and each Rating Agency.
Notwithstanding the foregoing, the Servicer shall not merge or
consolidate with any other Person or permit any other Person to become
a successor to the Servicer's business, unless (x) immediately after
giving effect to such transaction, no representation or warranty made
pursuant to SECTION 9.1 shall have been breached (for purposes hereof,
such representations and warranties shall be deemed made as of the date
of the consummation of such transaction) and no event that, after
notice or lapse of time, or both, would become Event of Default shall
have occurred and be continuing, (y) the Servicer shall have delivered
to the Trustee, the Rating Agencies and the Controlling Party an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption
comply with this Section and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been
complied with, and (z) the Servicer shall have delivered to the
Trustee, the Rating Agencies, the Controlling Party and the Noteholder
an Opinion of Counsel, stating in the opinion of such counsel, either
(A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and
protect the interest of the Purchaser and the Trustee, respectively, in
the Receivables and the Other Conveyed Property and reciting the
details of the filings or (B) no such action shall be necessary to
preserve and protect such interest.
36
(b) Any Person (i) into which the Backup Servicer (in its
capacity as Backup Servicer or successor Servicer) may be merged or
consolidated, (ii) resulting from any merger or consolidation to which
the Backup Servicer shall be a party, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the
Backup Servicer, or (iv) succeeding to the business of the Backup
Servicer, in any of the foregoing cases shall execute an agreement of
assumption to perform every obligation of the Backup Servicer under
this Agreement and, whether or not such assumption agreement is
executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further
act on the part of any of the parties to this Agreement, anything in
this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that
nothing contained herein shall be deemed to release the Backup Servicer
from any obligation.
SECTION 9.4. [RESERVED]
SECTION 9.5. [RESERVED].
SECTION 9.6. SERVICER AND BACKUP SERVICER NOT TO RESIGN.
Subject to the provisions of SECTION 9.3, neither the Servicer nor the
Backup Servicer shall resign from the obligations and duties imposed on it by
this Agreement as Servicer or Backup Servicer except (i) upon a determination
that by reason of a change in legal requirements the performance of its duties
under this Agreement would cause it to be in violation of such legal
requirements in a manner which would have a material adverse effect on the
Servicer or the Backup Servicer, as the case may be, and the Controlling Party
does not elect to waive the obligations of the Servicer or the Backup Servicer,
as the case may be, to perform the duties which render it legally unable to act
or to delegate those duties to another Person or, (ii) in the case of the Backup
Servicer, upon the prior written consent of the Controlling Party. Any such
determination permitting the resignation of the Servicer or Backup Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Trustee, the Owner Trustee, the Noteholder and the Controlling
Party. No resignation of the Servicer shall become effective until the Backup
Servicer or an entity acceptable to the Controlling Party shall have assumed the
responsibilities and obligations of the Servicer. No resignation of the Backup
Servicer shall become effective until an entity acceptable to the Controlling
Party shall have assumed the responsibilities and obligations of the Backup
Servicer; provided, however, that in the event a successor Backup Servicer is
not appointed within 60 days after the Backup Servicer has given notice of its
resignation and has provided the Opinion of Counsel required by this SECTION
9.6, the Backup Servicer may petition a court for its removal.
SECTION 9.7. REPORTING REQUIREMENTS.
(a) The Servicer shall furnish, or cause to be furnished to
the Controlling Party:
(i) AUDIT REPORT. As soon as available and in any event within
90 days after the end of each fiscal year of the Servicer, a copy of
the consolidated balance sheet of the Servicer and its Affiliates as at
the end of such fiscal year, together with the related statements of
earnings, stockholders' equity and cash flows for such fiscal year,
prepared in reasonable detail and in accordance with GAAP certified by
Independent Accountants.
(ii) QUARTERLY STATEMENTS. As soon as available, but in any
event within 45 days after the end of each fiscal quarter (except the
fourth fiscal quarter) of the Servicer, copies of the unaudited
consolidated balance sheet of the Servicer and its Affiliates as at the
end of such fiscal quarter and the related unaudited statements of
earnings, stockholders' equity and cash flows for the portion of the
fiscal year through such fiscal quarter (and as to the statements of
earnings for such fiscal quarter) in each case setting forth in
comparative form the figures for the corresponding periods of the
previous fiscal year, prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected therein
and certified by the chief financial or accounting officer of the
Servicer as presenting fairly the financial condition and results of
operations of the Servicer and its Affiliates (subject to normal
year-end adjustments).
37
ARTICLE X
---------
DEFAULT
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SECTION 10.1. SERVICER TERMINATION EVENTS.
For purposes of this Agreement, each of the following shall constitute
a "SERVICER TERMINATION EVENT":
(a) Any failure by the Servicer to deliver to the Trustee for
distribution to the Noteholder or deposit into any Pledged Account any
proceeds or payment required to be so delivered under the terms of this
Agreement that continues unremedied for a period of two Business Days
(or one Business Day with respect to payment of Purchase Amounts) after
written notice is received by the Servicer from the Trustee or the
Controlling Party or after discovery of such failure by a Responsible
Officer of the Servicer; or
(b) Failure by the Servicer to deliver to the Trustee and the
Controlling Party the Servicer's Certificate within three Business Days
after the date on which such Servicer's Certificate is required to be
delivered, or failure on the part of the Servicer to observe its
covenants and agreements set forth in SECTION 9.3(a);
(c) Failure on the part of the Servicer to duly observe or
perform any other covenants or agreements of the Servicer set forth in
this Agreement, which failure (i) materially and adversely affects the
rights of the Noteholder and (ii) continues unremedied for a period of
30 days after the earlier of knowledge thereof by the Servicer or after
the date on which written notice of such failure, requiring the same to
be remedied, shall have been given to the Servicer by the Trustee or
the Controlling Party;
(d) The occurrence of an Insolvency Event with respect to the
Servicer or the Seller (or, so long as the Seller is Servicer any of
the Servicer's Affiliates); PROVIDED, HOWEVER, that none of the events
described in this CLAUSE (d) shall constitute a Servicer Termination
Event if it relates solely to an Affiliate of the Servicer that is
currently the subject of any such proceeding or receivership described
above;
(e) Any representation, warranty or statement of the Servicer
made in this Agreement (without regard to any exception relating to the
▇▇▇▇▇▇ Case) or any certificate, report or other writing delivered
pursuant hereto shall prove to be incorrect in any material respect as
of the time when the same shall have been made (excluding, however, any
representation or warranty set forth in this Agreement relating to the
characteristics of the Receivables), and the incorrectness of such
representation, warranty or statement has a material adverse effect on
the Purchaser or the Noteholder and, within 30 days after the earlier
of knowledge thereof by the Servicer or after written notice thereof
shall have been given to the Servicer by the Trustee or the Controlling
Party the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured;
(f) The Controlling Party shall not have delivered a Servicer
Extension Notice pursuant to SECTION 4.15; or
(g) An Event of Default shall have occurred.
SECTION 10.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT.
If a Servicer Termination Event shall occur and be continuing, the
Controlling Party by notice given in writing to the Servicer may terminate all
of the rights and obligations of the Servicer under this Agreement. The outgoing
Servicer shall be entitled to its pro rata share of the Servicing Fee for the
number of days in the Accrual Period prior to the effective date of its
termination. On or after the receipt by the Servicer of such written notice or
upon termination of the term of the Servicer, all authority, power, obligations
and responsibilities of the Servicer under this Agreement, whether with respect
to the Note or the Receivables and Other Conveyed Property or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Controlling Party under SECTION 10.3); PROVIDED, HOWEVER, that
the successor Servicer shall have no liability with respect to any obligation
which was required to be performed by the terminated Servicer prior to the date
that the successor Servicer becomes the Servicer or any claim of a third party
based on any alleged action or inaction of the terminated Servicer. The
successor Servicer is authorized and empowered by this Agreement to execute and
38
deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the Other Conveyed Property and related documents to show the Purchaser as
lienholder or secured party on the related Lien Certificates, or otherwise. The
terminated Servicer agrees to cooperate with the successor Servicer in effecting
the termination of the responsibilities and rights of the terminated Servicer
under this Agreement, including, without limitation, the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the terminated Servicer for deposit, or have been deposited
by the terminated Servicer, in the Collection Account or thereafter received
with respect to the Receivables and the delivery to the successor Servicer of
all Receivable Files that shall at the time be held by the terminated Servicer
and a computer tape in readable form as of the most recent Business Day
containing all information necessary to enable the successor Servicer to service
the Receivables and the Other Conveyed Property. All reasonable costs and
expenses (including reasonable attorneys' fees) incurred in connection with
transferring any Receivable Files to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this SECTION 10.2
shall be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. In addition, any successor Servicer
shall be entitled to payment from the immediate predecessor Servicer for
reasonable transition expenses incurred in connection with acting as successor
Servicer, and to the extent not so paid, such payment shall be made pursuant to
SECTION 5.7 hereof. Upon receipt of notice of the occurrence of a Servicer
Termination Event, the Trustee shall give notice thereof to the Rating Agencies
and the Controlling Party. If requested by the Controlling Party, the successor
Servicer shall terminate the Lockbox Agreements and direct the Obligors to make
all payments under the Receivables directly to the successor Servicer (in which
event the successor Servicer shall process such payments in accordance with
SECTION 4.2(E)), or to a lockbox established by the successor Servicer at the
direction of the Controlling Party, at the successor Servicer's expense. The
terminated Servicer shall grant the Trustee, the successor Servicer and the
Controlling Party reasonable access to the terminated Servicer's premises at the
terminated Servicer's expense.
SECTION 10.3. APPOINTMENT OF SUCCESSOR.
(a) On and after the time the Servicer receives a notice of
termination pursuant to SECTION 10.2, upon non-extension of the
servicing term as referred to in SECTION 4.15, or upon the resignation
of the Servicer pursuant to SECTION 9.6, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in
the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of
expiration and non-renewal of the term of the Servicer upon the
expiration of such term, and, in the case of resignation, until the
later of (x) the date 45 days from the delivery to the Trustee of
written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (y) the date
upon which the predecessor Servicer shall become unable to act as
Servicer, as specified in the notice of resignation and accompanying
Opinion of Counsel; PROVIDED, HOWEVER, that the Servicer shall not be
relieved of its duties, obligations and liabilities as Servicer until a
successor Servicer has assumed such duties, obligations and
liabilities. Notwithstanding the preceding sentence, if the Backup
Servicer or any other successor Servicer shall not have assumed the
duties, obligations and liabilities or Servicer within 45 days of the
termination, non-extension or resignation described in this SECTION
10.3, the Servicer may petition a court of competent jurisdiction to
appoint any Eligible Servicer as the successor to the Servicer. Pending
appointment as successor Servicer, Backup Servicer (or such other
Person as shall have been appointed by the Controlling Party) shall act
as successor Servicer unless it is legally unable to do so, in which
event the outgoing Servicer shall continue to act as Servicer until a
successor has been appointed and accepted such appointment. In the
event of termination of the Servicer, ▇▇▇▇▇ Fargo Bank, National
Association, as the Backup Servicer shall assume the obligations of
Servicer hereunder on the date specified in such written notice (the
"ASSUMPTION DATE") pursuant to the Servicing and Lockbox Processing
Assumption Agreement or, in the event that the Controlling Party shall
have determined that a Person other than the Backup Servicer shall be
the successor Servicer in accordance with SECTION 10.2, on the date of
the execution of a written assumption agreement by such Person to serve
as successor Servicer. Notwithstanding the Backup Servicer's assumption
of, and its agreement to perform and observe, all duties,
responsibilities and obligations of the Seller as Servicer, or any
39
successor Servicer, under this Agreement arising on and after the
Assumption Date, the Backup Servicer shall not be deemed to have
assumed or to become liable for, or otherwise have any liability for
any duties, responsibilities, obligations or liabilities of (i) the
Seller or any other Servicer arising on or before the Assumption Date,
whether provided for by the terms of this Agreement, arising by
operation of law or otherwise, including, without limitation, any
liability for any duties, responsibilities, obligations or liabilities
of the Seller or any other Servicer arising on or before the Assumption
Date under SECTION 4.7 or 9.2 of this Agreement, regardless of when the
liability, duty, responsibility or obligation of the Seller or any
other Servicer therefor arose, whether provided by the terms of this
Agreement, arising by operation of law or otherwise, or (ii) under
SECTION 9.2(A)(II) OR (IV). Notwithstanding the above, if the Backup
Servicer shall be legally unable or unwilling to act as Servicer, the
Backup Servicer, the Trustee or the Controlling Party may petition a
court of competent jurisdiction to appoint any Eligible Servicer as the
successor to the Servicer. Pending appointment pursuant to the
preceding sentence, the Backup Servicer shall act as successor Servicer
unless it is legally unable to do so, in which event the outgoing
Servicer shall continue to act as Servicer until a successor has been
appointed and accepted such appointment. Subject to SECTION 9.6, no
provision of this Agreement shall be construed as relieving the Backup
Servicer of its obligation to succeed as successor Servicer upon the
termination of the Servicer pursuant to SECTION 10.2, the non-extension
of the servicing term as referred to in SECTION 4.15 or the resignation
of the Servicer pursuant to SECTION 9.6. If upon the termination of the
Servicer pursuant to SECTION 10.2, the non-extension of the servicing
term as referred to in SECTION 4.15 or the resignation of the Servicer
pursuant to SECTION 9.6, the Controlling Party appoints a successor
Servicer other than the Backup Servicer, the Backup Servicer shall not
be relieved of its duties as Backup Servicer hereunder.
(b) Any successor Servicer shall be entitled to such
compensation (whether payable out of the Collection Account or
otherwise) as the Servicer would have been entitled to under this
Agreement if the Servicer had not resigned or been terminated
hereunder.
SECTION 10.4. NOTIFICATION OF TERMINATION AND APPOINTMENT.
Upon any termination of, or appointment of a successor to, the
Servicer, the Trustee shall give prompt written notice thereof to the
Controlling Party, the Noteholder and to the Rating Agencies.
SECTION 10.5. WAIVER OF PAST DEFAUlTS.
The Controlling Party may, waive in writing any default by the Servicer
in the performance of its obligations under this Agreement and the consequences
thereof. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Termination Event arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
SECTION 10.6. ACTION UPON CERTAIN FAILURES OF THE SERVICER.
In the event that the Trustee shall have knowledge of any failure of
the Servicer specified in SECTION 10.1 which would give rise to a right of
termination under such Section upon the Servicer's failure to remedy the same
after notice, the Trustee shall give notice thereof to the Servicer, the
Controlling Party and the Noteholder. For all purposes of this Agreement
(including, without limitation, SECTION 6.2(B) and this SECTION 10.6), the
Trustee shall not be deemed to have knowledge of any failure of the Servicer as
specified in SECTIONS 10.1(C) through (H) unless notified thereof in writing by
the Servicer, the Controlling Party or the Noteholder. The Trustee shall be
under no duty or obligation to investigate or inquire as to any potential
failure of the Servicer specified in SECTION 10.1.
SECTION 10.7. CONTINUED ERRORS.
Notwithstanding anything contained herein to the contrary, if the
Backup Servicer becomes successor Servicer it is authorized to accept and rely
on all of the accounting, records (including computer records) and work of the
40
prior Servicer relating to the Receivables (collectively, the "PREDECESSOR
SERVICER WORK PRODUCT") without any audit or other examination thereof, and the
Backup Servicer as successor Servicer shall have no duty, responsibility,
obligation or liability for the acts and omissions of the prior Servicer. If any
error, inaccuracy, omission or incorrect or non-standard practice or procedure
(collectively, "ERRORS") exist in any Predecessor Servicer Work Product and such
Errors make it materially more difficult to service or should cause or
materially contribute to the Backup Servicer as successor Servicer making or
continuing any Errors (collectively, "CONTINUED Errors"), the Backup Servicer as
successor Servicer shall have no duty or responsibility, for such Continued
Errors; PROVIDED, HOWEVER, that the Backup Servicer as successor Servicer agrees
to use its best efforts to prevent further Continued Errors. In the event that
the Backup Servicer as successor Servicer becomes aware of Errors or Continued
Errors, the Backup Servicer as successor Servicer shall, with the prior consent
of the Controlling Party, use its best efforts to reconstruct and reconcile such
data as is commercially reasonable to correct such Errors and Continued Errors
and to prevent future Continued Errors. The Backup Servicer as successor
Servicer shall be entitled to recover its costs thereby expended in accordance
with SECTION 5.7(A)(X) hereof.
ARTICLE XI
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MISCELLANEOUS PROVISIONS
------------------------
SECTION 11.1. AMENDMENT.
(a) This Agreement may not be waived, amended or otherwise
modified except in a writing signed by the parties hereto and the
Noteholder.
(b) Promptly after the execution of any such amendment, waiver
or consent, the Trustee shall furnish written notification of the
substance of such amendment or consent to Rating Agencies.
(c) Prior to the execution of any amendment, waiver or consent
to this Agreement the Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such
amendment, waiver or consent is authorized or permitted by this
Agreement.
(d) The Trustee may, but shall not be obligated to, enter into
any such amendment, waiver or consent which affects the Trustee's own
rights, duties or immunities under this Agreement or otherwise.
SECTION 11.2. PROTECTION OF TITLE TO PROPERTY.
(a) The Seller, the Purchaser or Servicer or each of them
shall authorize, execute (if necessary) and file such financing
statements and cause to be authorized, executed (if necessary) and
filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and
protect the interest of the Purchaser and the interests of the Trustee
in the Receivables and in the proceeds thereof. The Seller shall
deliver (or cause to be delivered) to the Controlling Party and the
Trustee file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing.
(b) None of the Seller, the Purchaser or the Servicer shall
change its name, identity, jurisdiction of organization, form of
organization or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed in
accordance with PARAGRAPH (A) above seriously misleading within the
meaning of Section 9-506(a) of the UCC, unless it shall have given the
Controlling Party and the Trustee at least thirty days' prior written
notice thereof and shall have promptly filed appropriate amendments to
all previously filed financing statements or continuation statements.
Promptly upon such filing, the Purchaser, the Seller or the Servicer,
as the case may be, shall deliver an Opinion of Counsel to the Trustee,
the Controlling Party and the Noteholder, in a form and substance
reasonably satisfactory to the Controlling Party, stating either (A)
all financing statements and continuation statements have been
authorized, executed and filed that are necessary fully to preserve and
protect the interest of the Purchaser and the Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no
such action shall be necessary to preserve and protect such interest.
41
(c) Each of the Seller, the Purchaser and the Servicer shall
have an obligation to give the Controlling Party, the Owner Trustee and
the Trustee at least 60 days' prior written notice of any relocation of
its chief executive office or a change in its jurisdiction of
organization if, as a result of such relocation or change, the
applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement
or of any new financing statement and shall promptly file any such
amendment or new financing statement. The Servicer shall at all times
be organized under the laws of the United States (or any State
thereof), maintain each office from which it shall service Receivables,
and its chief executive office and jurisdiction of organization, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to
each Receivable accurately and in sufficient detail to permit (i) the
reader thereof to know at any time the status of such Receivable,
including payments and recoveries made and payments owing (and the
nature of each) and (ii) reconciliation between payments or recoveries
on (or with respect to) each Receivable and the amounts from time to
time deposited in the Collection Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Receivables
to the Purchaser, the Servicer's master computer records (including any
backup archives) that refer to a Receivable shall indicate clearly the
interest of the Purchaser in such Receivable and that such Receivable
is owned by the Purchaser and pledged to the Trustee. Indication of the
Purchaser's and the Trustee's interest in a Receivable shall be deleted
from or modified on the Servicer's computer systems when, and only
when, the related Receivable shall have been paid in full or
repurchased.
(f) If at any time the Seller or the Servicer shall propose to
sell, grant a security interest in or otherwise transfer any interest
in automotive receivables to any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser,
lender or other transferee computer tapes, records or printouts
(including any restored from backup archives) that, if they shall refer
in any manner whatsoever to any Receivable, shall indicate clearly that
such Receivable has been sold and is owned by the Purchaser and pledged
to the Trustee.
(g) The Servicer shall permit the Trustee, the Owner Trustee,
the Backup Servicer, the Noteholder and the Controlling Party and their
respective agents upon reasonable notice and at any time during normal
business hours to inspect, audit, and make copies of and abstracts from
the Servicer's records regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the
Controlling Party or to the Trustee, within five Business Days, a list
of all Receivables (by contract number and name of Obligor) then
pledged to the Trustee, together with a reconciliation of such list to
the Schedule of Receivables and to each of the Servicer's Certificates
furnished before such request indicating removal of Receivables from
the lien of the Indenture.
(i) The Servicer shall deliver to the Controlling Party, the
Owner Trustee and the Trustee within 90 days after the beginning of
each calendar year beginning with the first calendar year beginning
more than three months after the Closing Date, an Opinion of Counsel,
dated as of a date during such 90-day period, stating that, in the
opinion of such counsel, either (a) all financing statements and
continuation statement have been authorized, executed and filed that
are necessary fully to preserve and protect the interest of the
Purchaser and the Trustee in the Receivables and the Opinion
Collateral, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (b) no
such action shall be necessary to preserve and protect such interest.
Such Opinion of Counsel shall specify any action necessary (as of the
date of such opinion) to be taken in the following year to preserve and
protect such interest.
SECTION 11.3. NOTICES.
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All demands, notices and communications upon or to the Seller, the
Backup Servicer, the Servicer, the Owner Trustee, the Trustee or the Rating
Agencies under this Agreement shall be in writing, via facsimile, personally
delivered, or mailed by certified mail, return receipt requested, and shall be
deemed to have been duly given upon receipt (a) in the case of the Seller, to
Consumer Portfolio Services, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: Chief Financial Officer, Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇; (b) in the case of
the Servicer, to Consumer Portfolio Services, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇;
(c) in the case of the Purchaser, care of the Owner Trustee at the Corporate
Trust Office; (d) in the case of the Owner Trustee at the Corporate Trust
Office; (e) in the case of the Trustee or the Backup Servicer at the Corporate
Trust Office; (f) in the case of the Controlling Party, to WestLB AG, New York
Branch, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Attention: ▇▇▇▇▇
▇▇▇▇▇▇▇, Telecopy (▇▇▇) ▇▇▇-▇▇▇▇; (g) in the case of Moody's, to ▇▇▇▇▇'▇
Investors Service, Inc., ABS Monitoring Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇; and (h) in the case of Standard &
Poor's Ratings Group, to Standard & Poor's, a Division of The McGraw Hill
Companies, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Asset Backed
Surveillance Department, Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇. Any notice required or
permitted to be mailed to the Noteholder shall be given by first class mail,
postage prepaid, at the address of the Controlling Party. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Controlling Party shall receive such
notice.
SECTION 11.4. ASSIGNMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
Notwithstanding anything to the contrary contained herein, except as provided in
SECTIONS 8.4, 9.3 and this SECTION 11.4 and as provided in the provisions of
this Agreement concerning the resignation of the Servicer, this Agreement may
not be assigned by the Purchaser, the Seller or the Servicer without the prior
written consent of the Trustee, the Backup Servicer, the Controlling Party and
the Noteholder.
SECTION 11.5. LIMITATIONS ON RIGHTS OF OTHERS.
The provisions of this Agreement are solely for the benefit of the
parties hereto and for the benefit of the Owner Trustee and the Noteholder, as
third-party beneficiaries. Nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Collateral or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.6. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 11.7. SEPARATE COUNTERPARTS.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.8. HEADINGS.
The headings of the various Articles and Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 11.9. GOVERNING LAW.
THIS AGREEMENT (OTHER THAN SECTIONS 2.1(A) AND 2.2 HEREOF) SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTIONS
2.1(A) AND 2.2 OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
UNDER SUCH SECTION SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
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SECTION 11.10. ASSIGNMENT TO TRUSTEE.
The Seller hereby acknowledges and consents to any mortgage, pledge,
assignment and grant of a security interest by the Purchaser to the Trustee
pursuant to the Indenture for the benefit of the Noteholder of all right, title
and interest of the Purchaser in, to and under the Receivables and Other
Conveyed Property and/or the assignment of any or all of the Purchaser's rights
and obligations hereunder to the Trustee.
SECTION 11.11. NONPETITION COVENANTS.
Notwithstanding any prior termination of this Agreement, the Servicer
and the Seller shall not, prior to the date which is one year and one day after
the Termination Date, acquiesce, petition or otherwise invoke or cause the
Purchaser to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Purchaser under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Purchaser or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Purchaser.
SECTION 11.12. LIMITATION OF LIABILITY OF TRUSTEE
(a). Notwithstanding anything contained herein to the
contrary, this Agreement has been executed and delivered by ▇▇▇▇▇ Fargo
Bank, National Association, not in its individual capacity but solely
as Trustee and Backup Servicer and in no event shall ▇▇▇▇▇ Fargo Bank,
National Association, have any liability for the representations,
warranties, covenants, agreements or other obligations of the Purchaser
hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Purchaser.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not
in its individual capacity but solely in its capacity as Owner Trustee
of the Issuer and in no event shall Wilmington Trust Company in its
individual capacity or, except as expressly provided in the Trust
Agreement, as Owner Trustee have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer
hereunder or in any recourse shall be had solely to the assets of the
Issuer. For all purposes of this Agreement, in the performance of its
duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject
to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
SECTION 11.13. INDEPENDENCE OF THE SERVICER.
For all purposes of this Agreement, the Servicer shall be an
independent contractor and shall not be subject to the supervision of the
Purchaser, the Trustee and Backup Servicer with respect to the manner in which
it accomplishes the performance of its obligations hereunder. Unless expressly
authorized by this Agreement, the Servicer shall have no authority to act for or
represent the Purchaser in any way and shall not otherwise be deemed an agent of
the Purchaser.
SECTION 11.14. NO JOINT VENTURE.
Nothing contained in this Agreement (i) shall constitute the Servicer
and the Purchaser as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (ii) shall be
construed to impose any liability as such on any of them or (iii) shall be
deemed to confer on any of them any express, implied or apparent authority to
incur any obligation or liability on behalf of the others.
SECTION 11.15. INTENTION OF PARTIES REGARDING DELAWARE SECURITIZATION
ACT.
It is the intention of the Purchaser and the Seller that the transfer
and assignment of the property contemplated by SECTION 2.1(A) of this Agreement
shall constitute a sale of property from the Seller to the Purchaser, conveying
good title thereto free and clear of any liens, and the beneficial interest in
and title to such assets shall not be part of the Seller's estate in the event
of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy or similar law. In addition, for purposes of complying with the
requirements of the Asset-Backed Securities Facilitation Act of the State of
Delaware, 6 Del. C. ss. 2701A, et seq. (the "SECURITIZATION ACT"), each of the
parties hereto hereby agrees that:
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(a) any property, assets or rights purported to be
transferred, in whole or in part, by the Seller to the Purchaser
pursuant to this Agreement shall be deemed to no longer be the
property, assets or rights of the Seller;
(b) none of the Seller, its creditors or, in any insolvency
proceeding with respect to the Seller or the Seller's property, a
bankruptcy trustee, receiver, debtor, debtor in possession or similar
person, to the extent the issue is governed by Delaware law, shall have
any rights, legal or equitable, whatsoever to reacquire (except
pursuant to a provision of this Agreement), reclaim, recover,
repudiate, disaffirm, redeem or recharacterize as property of the
Seller any property, assets or rights purported to be transferred, in
whole or in part, by the Seller to the Purchaser pursuant to this
Agreement;
(c) in the event of a bankruptcy, receivership or other
insolvency proceeding with respect to the Seller or the Seller's
property, to the extent the issue is governed by Delaware law, such
property, assets and rights shall not be deemed to be part of the
Seller's property, assets, rights or estate; and
(d) the transaction contemplated by this Agreement shall
constitute a "securitization transaction" as such term is used in the
Securitization Act.
SECTION 11.16. SPECIAL SUPPLEMENTAL AGREEMENT.
If any party to this Agreement is unable to sign any amendment or
supplement due to its dissolution, winding up or comparable circumstances, then
the consent of the Controlling Party shall be sufficient to amend this Agreement
without such party's signature.
SECTION 11.17. LIMITED RECOURSE.
Notwithstanding anything to the contrary contained in this Agreement,
the obligations of the Purchaser hereunder are solely the obligations of the
Purchaser, and shall be payable by the Purchaser, solely as provided herein. The
Purchaser shall only be required to pay (a) any fees, expenses, indemnities or
other liabilities that it may incur hereunder (i) from funds available pursuant
to, and in accordance with, the payment priorities set forth in SECTION 5.7(A)
and (ii) only to the extent the Purchaser receives additional funds for such
purposes or to the extent it has additional funds available (other than funds
described in the preceding clause (i)) that would be in excess of amounts that
would be necessary to pay the debt and other obligations of the Purchaser
incurred in accordance with the Purchaser's trust agreement and all financing
documents to which the Purchaser is a party. In addition, no amount owing by the
Purchaser hereunder in excess of the liabilities that it is required to pay in
accordance with the preceding sentence shall constitute a "claim" (as defined in
Section 101(5) of the Bankruptcy Code) against it. No recourse shall be had for
the payment of any amount owing hereunder or for the payment of any fee
hereunder or any other obligation of, or claim against, the Purchaser arising
out of or based upon any provision herein, against any member, employee,
officer, agent, director or authorized person of the Purchaser or any Affiliate
thereof; PROVIDED, HOWEVER, that the foregoing shall not relieve any such person
or entity of any liability they might otherwise have as a result of fraudulent
actions or omissions taken by them.
SECTION 11.18. ACKNOWLEDGEMENT OF ROLES.
The parties expressly acknowledge and consent to ▇▇▇▇▇ Fargo Bank,
National Association acting in the multiple capacities of Backup Servicer and
Trustee. The parties agree that ▇▇▇▇▇ Fargo Bank, National Association in such
multiple capacities shall not be subject to any claim, defense or liability
arising from its performance in any such capacity based on conflict of interest
principles, duty of loyalty principles or other breach of fiduciary duties to
the extent that any such conflict or breach arises from the performance by ▇▇▇▇▇
Fargo Bank, National Association of any other such capacity or capacities in
accordance with this Agreement or any other Basic Documents to which it is a
party.
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SECTION 11.19. TERMINATION.
The respective obligations and responsibilities of the Seller, the
Purchaser, the Servicer, the Backup Servicer, and the Trustee created hereby
shall terminate on the Termination Date; PROVIDED, HOWEVER, in any case there
shall be delivered to the Trustee and the Controlling Party an Opinion of
Counsel that all applicable preference periods under federal, state and local
bankruptcy, insolvency and similar laws have expired with respect to the
payments made to the Noteholder and the Controlling Party through the
Termination Date. The Servicer shall promptly notify the Trustee, the
Controlling Party, the Seller, the Purchaser, each Rating Agency and the
Noteholder of any prospective termination pursuant to this SECTION 11.19.
SECTION 11.20. NO NOVATION
The amendment and restatement of this Sale and Servicing Agreement
shall not be deemed to be a novation or repayment of the outstanding Advances
and the security interest of the Trustee in the Collateral shall remain in full
force and effect after giving effect to the amendment and restatement of this
Sale and Servicing Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and the year first above written.
CPS WAREHOUSE TRUST, as Purchaser
By: Wilmington Trust Company, not in its
individual capacity, but solely as Owner Trustee
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
CONSUMER PORTFOLIO SERVICES, INC., as
Seller and Servicer
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, not in
its individual capacity, but solely as Backup
Servicer and Trustee
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
WESTLB AG, acting through its New York Branch,
as Controlling Party
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
CONSENTED TO BY:
----------------
WESTLB AG, acting through its New York Branch , as
Noteholder
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
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ACKNOWLEDGEMENT
---------------
TFC, in its capacity as a subservicer with respect to the TFC
Receivables hereby acknowledges and agrees to the provisions set forth in
Section 4.18 of the foregoing Agreement.
THE FINANCE COMPANY
By:____________________________
Name:__________________________
Title:_________________________
48